S Arabia takes on Russia in European oil market

With the top oil exporters of the world fighting for market share, oil refiners in Europe are switching from longstanding use of Russian crude to Saudi grades.

Russia had for years been dominating the Asian markets where Saudi Arabia had at one time reigned unchallenged. However, Riyadh is now retaliating in Europe, Russia's own backyard.

According to commentators, this is likely to further complicate a dialogue between Moscow and the OPEC exporters' group on tackling the global oil glut, as joint production cuts remaining a remote possiblity.

Reuters quoted trading sources as saying Exxon, Shell, Total and Eni had been buying more Saudi oil for their refineries in Western Europe and the Mediterranean in the past few months at the expense of Russian oil.

"I'm buying less and less Russian crude for my refineries in Europe simply because Saudi barrels are looking more attractive. It is a no brainer for me as Saudi crude is just cheaper," an oil trader with an oil major told Reuters.

Riyadh had traditionally focused on the US and leaving Russia to cater to Europe, especially the eastern countries that were once part of the Soviet bloc.

Meanwhile commentators say Saudi Arabia was taking a massive gamble on the world oil markets, with its ''pump at any price'' policy driving oil down to below $50 per barrel. The policy had so far appeared to be having the desired effect of squeezing out marginal producers, particularly in the shale industry, unable to cover costs at that level.

Every spike above $50 that happened last week, led to hedging from shale companies, with late last week, US producers locking in new production at over $50 for 2016 and 2017 delivery.

As prices reached about $53, further increases were limited by sellers locking in prices but even so around 11 per cent of expected 2016 production was forward sold, Reuters said quoting HIS Energy.

The Saudis had aimed to squeeze out higher-priced producers like the US shale industry.

The Financial Times reported after adding 1 million barrels per day per year of production in every year since 2012, next year would see the first decline in shale oil production from 9.3 million bpd to 8.9 million bpd.