Get Set For Intense Competition in a Rapidly Changing Global Oil Market: Russia

Igor Sechin, head of Rosneft in Russia

Quicker-than-expected developments on several fronts are causing substantial and perhaps even fundamental shifts in the global oil market, beginning with Venezuela's rapidly-crumbling economy causing production to drop to 2.37 million barrels per day (bpd) in May.

That's down 5 percent from April and nearly 11 percent from 2015's average, and conditions overall in the country are such that it is said to be negotiating with China to obtain a grace period in its oil-for-loans deal that would improve its ability to make bond payments.

While analysts says the Venezuelan situation impacts some of the price gains made by oil of late, another quicker-than-expected development – the resurgence of Iran in the global production marketplace – has resulted in its oil exports about to hit the highest level in almost 4 and a half years in June: up by about 100,000 bpd from last month to 2.31 million bpd, according to some reports.

Although loadings of Iranian oil for China, the Islamic Republic's biggest customer, were at a three-month low in June at 610,000 bpd, India's loadings were about 406,000 bpd; South Korea is at a multi-year high of 323,000 bpd; and Japan is loading 290,000 bpd, the highest since April.

It's not a stretch to extrapolate deeper meaning from these figures: many analysts are pointing to once-mighty China as now a source of potential trouble due to its demand for oil about to "fall off a cliff" in the near future, while India has repeatedly been cited as one of several emerging nations that will ultimately play a big role in adjusting the market.

In the midst of all this activity, Igor Sechin, head of Rosneft in Russia, said in an interview with Il Sole 24 this week that he expects the fight for global energy market share to intensify and calls Saudi Arabia's entry into eastern European markets being the "toughest competition" for his nation – which has recently been gaining ground in Asian markets, where the Saudis were once the dominant suppliers.

In a statement that could apply to market players overall but pertained to the former Soviet Union, Sechin said, "The main challenge for Russia's energy sector is a sharp increase in competition on global energy markets.

"In future, a tenacious competition is expected for keeping a share of traditional markets and to increase the share of new energy markets."

While it's near-impossible to predict market trajectory either in terms of production or demand, analysts earlier this week pointed to various developments suggesting that a "lower for longer" norm of $65 oil may be a reality for some time to come.