AS THE FOOL THINKS, SO THE BELL CLINKS
From global majors such as Shell and Total to more modest Polish energy firms, oil refiners in Europe are cutting their longstanding use of Russian crude in favour of Saudi grades as the world's top exporters fight for market share.
Russia has for years been muscling in on Asian markets where Saudi Arabia was once the unchallenged dominant supplier. But now Riyadh is retaliating in Moscow's backyard of Europe with aggressive price discounting.
This has nothing to do with Western sanctions imposed on Russia over Ukraine, which apply to energy industry equipment but not to oil or gas itself. Instead it is a commercial battle for customers as both exporters ramp up their output despite weak world oil prices.
This is likely to complicate further a dialogue between Moscow and the OPEC exporters' group on tackling the global oil glut, with joint production cuts already looking elusive.
Trading sources told Reuters that majors such as Exxon, Shell, Total and Eni have been all 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," said a trading source with one major, who asked not to be named because he is not allowed to speak to the media.
Riyadh traditionally focused on the U.S. and Asian markets, leaving Moscow as a major supplier to Europe, especially the eastern countries that were once part of the Soviet bloc.
But Russia's most powerful oil executive, Rosneft chief Igor Sechin, said on Tuesday that Saudi Arabia had started supplying ex-communist Poland at "dumping" prices. Then on Wednesday, Russian Energy Minister Alexander Novak described the Saudi entry into eastern European markets was the "toughest competition".
Trading sources said at least one cargo reached the Polish port of Gdansk in September and two more could come in October, to be processed by refiners PKN Orlen and Lotos.
Two trading sources said Saudi Arabia was looking at storing crude in Gdansk so that it can supply eastern European customers more quickly, just as it has done for years for western European clients from ports in the Netherlands or Belgium.
One trader said supplies from Gdansk could be sent to Germany to compete with Russian crude sent down the Soviet-built Druzhba (Friendship) pipeline.
The Baltic state of Lithuania, once a Soviet republic, is also looking to diversify its energy supplies. Lithuanian energy minister Rokas Masiulis told Reuters on Wednesday that the country is in talks with U.S. liquefied natural gas company Cheniere Energy Inc over possible imports as it tries to cut its dependence on Russian supplier Gazprom.
LOCKING MARKET SHARE
The battle may raise suspicions in Moscow that Riyadh is trying to punish the Kremlin for supporting Syrian President Bashar al-Assad, an enemy of Saudi Arabia, most recently with Russian air strikes on rebel groups.
In fact, Moscow and Riyadh were already locked in another battle for market share in Asia long before Syria slid into civil war after 2011 or the West imposed the sanctions on Russia last year.
Over the past decade, Russia has diverted as much as a third of its oil exports to Asia by building gigantic pipelines into mainland China and its Pacific coast.
"There is a perception that because Russia has been pushed from the West, they have been turning to the East. In fact, Russia has been actively locking market share in Asia for a long time," said Seth Kleinman, the head of energy research at Citigroup.
Kleinman said the competition has become so intense in Asian markets in recent months that Saudi Arabia had to reduce supplies there in the face of growing deliveries from rivals such as Russia, Kuwait and Angola.
Meanwhile, the low oil prices have spurred demand in Europe after years of lacklustre performance.
"For the first time in many years the European market looks more interesting than the Asian market. So Middle Eastern producers are looking to take that opportunity," a senior Iraqi oil source told Reuters.
The competition is likely to intensify in the next few months as Iran, which supplied between five and 10 percent of Europe's crude before 2012, is set to return with large volumes if and when Western sanctions on Tehran are lifted.
"The Saudis want to secure the market share before Iran comes back," said a trading source with an oil major.
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U.S. DT - The sum total in September of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC outflow of $29.1 billion. Of this, net foreign private inflows were $23.5 billion, and net foreign official outflows were $52.7 billion.
U.S. FRB - Industrial production edged up 0.1 percent in October, as a gain for manufacturing outweighed decreases elsewhere. As a result of upward revisions primarily in mining, the overall index is now reported to have advanced at an annual rate of 4.7 percent in the third quarter, appreciably above the gain of 3.3 percent reported initially.
WNN - "nuclear energy is a "mature, low greenhouse gas emission source of baseload generation that could make an increasing contribution to global development based on low-carbon energy supply".
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