TOKYO (Dec 4): Saudi Arabia will probably deepen discounts for crude supplies to Asia after leading OPEC to maintain the group’s output target amid a global battle for market share, according to a Bloomberg survey of traders.

The world’s biggest oil exporter will announce January official selling prices to buyers in Asia this week, after lifting its Arab Light grade from the lowest level in almost six years a month earlier.

The largest producer in the Organization of Petroleum Exporting Countries may offer bigger discounts, according to 12 of 13 respondents in the survey.

One participant forecast price differentials to be unchanged.

Saudi Arabia is discounting its crude as OPEC’s decision to maintain production quotas prompts speculation the group is prepared to let prices fall to defend its market share against more expensive US shale output.

Benchmark futures contracts have collapsed almost 40 percent from a June peak as competition between suppliers increased amid slowing demand.

“There’s no question that the Saudis want to maintain market share,” Victor Shum, a Singapore-based vice president at IHS, an industry consultant, said by phone today.

“They could cut prices to make them competitive in an environment that still seems to be under a lot of downward pressure.”

Arab Light, the largest Saudi oil stream, will sell in Asia next month at US$2 a barrel below the average of Oman and Dubai grades, Masahi Nakayama, the general manager of the crude and tanker department at Cosmo Oil, a Japanese refiner, said last week.

Price cuts
State-run Saudi Arabian Oil is offering the grade at 10 cents a barrel below Oman and Dubai this month, according to Nov 3 statement from the company known as Saudi Aramco.

That’s up from a discount of US$1.05 for November, the widest since December 2008.

Front-month cargoes of Dubai crude cost US$1.48 a barrel less than those for later deliveries on Nov 19, the biggest discount since November 2008, data compiled by Bloomberg show.

This market structure, called contango, influences the way Aramco sets its oil prices and may prompt the reductions, according to Nakayama.

“If the discount for Arabian Light crude surpasses US$1, it will be quite unusual for January when oil demand for heating peaks in the Northern Hemisphere,” said Setoh Shohei, a Tokyo-based manager at Japan Biofuels Supply, a joint venture of the nation’s refiners, and a former crude trader.

Global oversupply
OPEC last week signalled it won’t adjust supply to influence prices, instead preferring to maintain market share amid the unprecedented US shale boom.

The 12-member group, which supplies about 40 percent of the world’s oil, kept its collective quota at 30 million barrels a day, a target first set in January 2012.

The global oversupply will almost double to 1.3 million a day in the first half of next year, Citigroup said in a Nov 27 report.

Saudi Arabian Oil Minister Ali Al-Naimi, who resisted calls from some OPEC members to cut supplies, has expressed concern behind closed doors about rising US shale output, according to Iranian Oil Minister Bijan Namdar Zanganeh.

“If the Saudis start selling too aggressively now, it may create a discounting battle among OPEC countries and that could end up causing political unrest in some places,” Takashi Hayashida, the chief executive officer of Elements Capital, a Tokyo-based hedge fund that focuses on energy.

“That’s not what Saudi Arabia wants, as political instability hinders growth in oil demand. I expect the cut won’t be too drastic this time with consideration for this concern.”

Market share
Surging US shale production has reduced the nation’s imports, boosting supplies available in Asia.

Cargoes from North America to Russia and Latin America to Africa are finding buyers in the region amid the surplus in international markets.

OPEC pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a separate Bloomberg survey of oil companies, producers and analysts showed.

The group is next scheduled to meet on June 5.

Saudi Arabia produced an estimated 9.7 million barrels a day last month, data compiled by Bloomberg show.

In the US, output increased to 9.08 million barrels a day through Nov 21, the most in weekly records that started in January 1983, according to the Energy Information Administration.