Saudi Arabia and Iran are showing no let up in their market share war, just days after Opec (Organization of Petroleum Exporting Countries) announced an informal meting to discuss ways to stabilise falling prices.
The Opec announced on Monday it will hold informal talks on the sidelines of a conference in the Algerian capital next month. Saudi Arabia, the world's largest crude exporter, told Opec that it boosted oil output to a record 10.67 million barrels a day in July, two people with knowledge of the data said. Iran's output is up to 3.85 million barrels a day, Fars news agency reported, citing Oil Minister Bijan Namdar Zanganeh. That's the highest since 2008, data compiled by Bloomberg show.
"It only gives one signal to the markets that the Saudis are not here to scale back, especially in the face of Iranians bringing more oil to the market," Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg television interview. "I doubt there's going to be any concrete agreement despite there being talks."
Saudi Arabia typically pumps more oil in the summer to meet higher domestic energy demand from air conditioning.
The kingdom is also engaged in a battle for market share with rival Iran and has cut prices to its customers in Asia, the biggest market for both exporters. Kuwait on Wednesday also cut its pricing to Asia, widening the discount to $2.65 a barrel for September from $1.70 a barrel in August.
Opec's smaller producers, which have driven calls to cap the group's output, can only look on as prices tumbled more than 50 per cent since mid 2014. The last effort to freeze output in April, which also included non-Opec producer Russia, collapsed after Saudi Arabia demanded that Iran be part of the deal.
Iran still opposes any limits on its production, with the country seeking to reclaim its pre-sanctions share of Opec's total output before contributing to any production freeze, according to an Opec delegate who asked not to be identified.
Opec nations aren't pushing to revive the aborted April proposal, two delegates from the group saidlast week, and analysts don't expect any deal to be reached.
"These planned Opec discussions may be viewed by some as a cheap possibility to try and stabilize the market," said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. "It's more likely to be a way of further destroying the market's confidence in Opec, as the organization cries wolf once again."
