Has Saudi Arabia already switched tack and started to surreptitiously balance supply and demand in the crude oil market?
One of the persistent themes of crude oil markets since the price crashed in mid-2014 is that top exporter Saudi Arabia decided to stop its balancing role and instead chase market share, no matter the implication for prices.
However, there are signs that the pursuit of market share by the kingdom is no longer a top priority, especially in their buyers in Asia.
Figures from top Asian crude buyers China, India, Japan and South Korea suggest that Saudi Arabia is effectively conceding market share to rivals such as fellow Gulf producers Iran and Iraq, as well as an increasingly assertive Russia.
While this may not exactly be a voluntary process, it does appear that Saudi Aramco, the kingdom's state oil company, isn't pulling out the stops to reverse the loss of market share.
For the past four months Aramco has raised the official selling price (OSP) of its benchmark Arab Light grade to refiners in Asia, which take about two-thirds of the kingdom's exports.
The OSP for July-loading cargoes was set at a premium of 60 cents a barrel to the regional Oman-Dubai crude benchmark, up from 25 cents in June and a significant reversal of the discount of $1 as recently as March.
It's likely the case that Aramco is simply adjusting prices to reflect moves in the Oman-Dubai timespreads and also to reflect a stronger premium for global benchmark Brent over Dubai.
But the mere fact that the OSP has returned to what could be considered more normal patterns indicates the Saudis may be stepping back from a market share at all costs policy.
From October 2014 to May this year the OSP for Arab Light cargoes to Asia was at a discount to Oman-Dubai for all but three of those 20 months.
This extended period of discounting coincided with the period where the Saudis appeared determined not to cede market share to rivals.
The recent change back to premiums for the OSP perhaps indicates that the Saudis have taken the view that it's better to give a little ground to rivals in the expectation that the market is already balancing and prices can move sustainably higher.
Certainly the import data from major Asian consumers seems to support this view.
China's imports from Saudi Arabia in the first five months of the year rose 3.87 percent to 21.86 million tonnes, equivalent to about 1.05 million barrels per day (bpd).
That doesn't sound too bad, but China's total imports are up 16.5 percent in the first five months of 2016 compared to the same period last year.
Russia has also toppled Saudi Arabia as the top supplier to China, with imports rising 41.8 percent to 22.17 million tonnes, or about 1.06 million bpd, in the January-May period.
IRAN, IRAQ GRABBING BIGGER SLICES
India, Asia's second-largest crude importer, shows a similar pattern, but with Iran and Iraq as the producers grabbing higher shares.
India imported 856,200 bpd from Saudi Arabia in the first five months of the year, up 9.4 percent from the same period in 2015, according to trade sources and ship-tracking data compiled by Thomson Reuters Oil Research and Forecasts.
Again, a 9.4 percent gain doesn't sound too bad, but India's imports from Iran rose 64.5 percent to 334,100 bpd and those from Iraq jumped 55.2 percent to 892,300 bpd in the first five months of the year.
Iraq has replaced Saudi Arabia as India's top supplier, meaning that the Saudis have lost their top spots to rivals in Asia's two biggest importers, surely a sign that pursuing market share is no longer the main game.
Iran is also having considerable success in winning back market share lost while it was under Western sanctions over its nuclear program.
It's a slightly better story for the Saudis in Japan, the number three importer in Asia, with imports rising 12.6 percent in the first five months of 2016 to the equivalent of about 1.25 million bpd.
Iraq has seen a far bigger percentage gain, with Japan increasing purchases by 50.9 percent, but this was off a very small base and imports in the first five months were still a modest 71,800 bpd.
Among Japan's major suppliers, the big loser is the United Arab Emirates, which has seen its imports drop by 5.4 percent, while fellow OPEC member Qatar has increased its oil exports to Japan by 22.8 percent.
South Korea, the fourth-biggest Asian oil importer, has bought 6.7 percent less crude from Saudi Arabia in the first five months of this year compared to the same period in 2015, although the kingdom is still the biggest supplier.
Iran has more than doubled its exports to South Korea in the January-May period and is now the third-biggest supplier behind Saudi Arabia and Kuwait.
The pattern that is emerging so far in 2016 is that while the Saudis are selling more oil to their major buyers, with the exception of South Korea, their rivals are doing better at building market share.
The Saudis have hinted that they may return to their traditional role of balancing the market once the global oil market recovers.
"Despite the surplus in global oil production and lower prices, the focus of attention remains on countries such as Saudi Arabia which, due to its strategic importance, will be expected to balance supply and demand once market conditions recover," Energy Minister Khalid al-Falih was quoted as saying on June 22.
The import data and the Saudi pricing moves suggest they have already started this process.http://www.reuters.com/article/us-column-russell-crude-saudi-idUSKCN0ZG0E1