Saudi Arabia becomes a major power of refined fuel, triggers price war
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The world’s top crude oil exporter Saudi triggers potential price war with its Asian competitors by flooding the market with millions of barrels of diesel. Saudi Arabia, a leading member in the Organization of Petroleum Exporting Countries (OPEC), already pledged last November to keep crude output high to defend its market share against higher-cost producers.
While the strategy has kept crude markets well-supplied and prices low, the Kingdom has seen mixed success in defending its market share as global production remains high despite low prices.
Saudi Arabia is now processing more of its crude at home as its massive refineries turn it into the world's fourth-largest refiner, in a tie with
Aramco Trading Co, a subsidiary of state oil giant
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"We are already seeing the impact in the Asia-Pacific," said Suresh Sivanandam, principal analyst for refining and chemicals at Wood Mackenzie.
"This year there is not a single drop of diesel exported from Singapore to the Middle East," he added, referring to a once popular diesel export route.
The ramp-up mainly of ultra low sulphur diesel to Europe sees the Saudis compete head on with big Asian diesel exporters India and
The flurry of shipping activity out of Yanbu has also pushed up freight rates for long-range tankers by nearly 20 percent since last week, a shipbroker said.
Saudi Arabia opened its newest 400,000-barrels per day refinery in Yanbu in April, reaching full capacity within two months.
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"Yanbu has become a distillates monster," a shipbroker said, referring to the hike in exports from the Red Sea port.
At least seven long-range vessels have been provisionally booked to load diesel from Yanbu headed for Europe, shipping fixtures showed.
One of them is the 120,000-tonne Suezmax tanker Atina, carrying diesel to Europe, an unusually big ship to transport the fuel that showcases the scale of the new Saudi operations.
Exports from the Gulf are expected to rise further as its own demand is set to fall at the end of summer when power generation drops.
(Image credits: Indiatimes)
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