Russian oil exports to Asia are a real threat to Saudi Arabia, said veteran analyst Paul Sankey.
That’s despite Saudi Arabia’s recent focus on short sellers in the oil market.
“The real issue is can the Saudis corral Russia?” Sankey told Bloomberg TV.
Russian oil exports to Asian markets are a real threat to Saudi Arabia, which is seeing its price premiums eroded by competition, according to long-time industry analyst Paul Sankey.
Meanwhile, he gave little credence to Saudi Arabia’s claims that market short sellers were behind underwhelming oil prices.
“Frankly, I don’t know why they’re so obsessed with speculators. I mean, you can squeeze speculators on a short-term basis. But the real problem is the overall oil balance,” Sankey told Bloomberg TV on Wednesday.
On Tuesday, Saudi Energy Minister Prince Abdulaziz bin Salman cautioned short-sellers to beware of economic pain just days ahead of an OPEC+ meeting, though he did not outline specific actions.
The warning helped oil prices rally. But to Sankey, Saudi Arabia should be more focused on Russia than short-sellers.
“The real issue is can the Saudis corral Russia? Russia is a threat to Saudi, because what Russia is doing is it’s sending its oil to Asia, and it’s cutting the traditional long-term Saudi premium for selling oil to Asia,” he said. “That’s a much bigger deal than people appreciate between Russia and Saudi in terms of market share and competition.”
And while Russian President Vladimir Putin and de facto Saudi ruler Crown Prince Mohammed bin Salman appear to have good relations, it’s not clear the same can be said about their respective oil ministers, Sankey added.
Potential tensions between the two oil giants, who have coordinated production in recent years, comes as Russia has had to find alternatives for its energy exports after sanctions largely shut Moscow out of European markets.
Earlier this year, Russia’s oil exports surpassed the volumes hit before its invasion of Ukraine, with China and India accounting for roughly 90% of its seaborne crude shipments.
And there’s little sign that Russia will lessen its reliance on Asia. Russian Deputy Prime Minister Alexander Novak indicated this week that Moscow could supply 40% of China’s energy needs.
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