Iran Offers Greater Discounts on Oil to Asian Customers in Competition with Saudi Arabia

Reports indicate that Iran is selling its oil to Asian buyers at a discount greater than that of Saudi Arabia to attract customers. As the sharp decline in global oil prices has severely reduced Iran's oil revenue, Iran is trying to regain its significant market share in oil following the lifting of sanctions and in competition with Saudi Arabia. Bloomberg reported on Thursday, February 11, citing an unnamed official from the National Iranian Oil Company, that Iran is selling its heavy crude oil for delivery in March at a discount greater than Saudi Arabia to Asian countries. According to this report, this is the first time in a decade that Iran has offered a greater discount than Saudi Arabia to its customers. The unnamed official from the National Iranian Oil Company stated that Iranian crude oil will be offered at $2.60 per barrel lower than the average crude oil prices of Oman and Dubai. Dubai and Oman crude oil are used as pricing benchmarks for Gulf producers exporting to Asian markets. Bloomberg's report states that Iran has followed Saudi Arabia in its crude oil pricing at least since 2006, but now, based on the agency's calculations, it is offering an additional 10 cents discount to buyers starting in March. Bijan Namdar Zangeneh, Iran's Minister of Oil, has repeatedly stated that they intend to immediately increase oil exports by 500,000 barrels per day following the lifting of sanctions with the implementation of the JCPOA (nuclear agreement). Iran, now the fifth-largest oil producer in OPEC, was previously the second-largest producer in the organization before sanctions intensified in 2012. The official from the National Iranian Oil Company told Bloomberg that due to low demand, they are currently not following the four-month pricing framework to attract more customers. According to Bloomberg, the Saudi National Oil Company offered its medium crude oil for March delivery to buyers in Asia last week at a discount of $2.40. Based on the four-month pricing that the National Iranian Oil Company had been following, it was expected that Iranian heavy oil would be offered at $2.50 lower than the average benchmarks of Oman and Dubai. The Iranian oil official, who requested anonymity due to 'domestic political issues,' also mentioned an additional 10 cents discount for the 'Forouzan' blend to buyers in Asia, stating that this blend will be offered at $2.43 less than the average of Oman and Dubai for March. However, the National Iranian Oil Company has maintained the four-month pricing framework for Iran's light oil, selling it at 80 cents lower than the benchmarks. Meanwhile, the decline in global oil prices resumed on Thursday, with U.S. crude falling by 70 cents to $26.77 per barrel, while Brent crude dropped by 33 cents to $30.50.