Saudi Arabia having 'a very difficult time selling oil' as Russia and Iraq compete for trade

China, South Africa and the US are among the countries importing less Saudi Arabian oil

Saudi Arabia is expected to continue to pump oil until other oil-producing companies agree to a freeze (Reuters)

Saudi Arabia is struggling to sell all of its oil despite increasing output to record levels.

China, South Africa and the US are among the countries importing less Saudi Arabian oil, according to data by FGE, an energy consultancy, as the kingdom loses ground to competitors including Russia and Iraq.

“Saudi Arabia has had a very difficult time selling oil in this environment,” Ed Morse, an analyst at Citigroup, told the Financial Times.

“Its rivals are going into a very crowded market in a very aggressive way.”

The price of oil has recovered from $30-a-barrel lows in January, but is still 65 per cent off its June 2014 peak.

The fall in revenues has wreaked havoc in countries like Saudi Arabia where the economy is reliant on oil.

Some of Saudi Arabia's most important trading partners are buying oil elsewhere

Source: FGE

Saudi Arabia is seeking $6-8 billion in loans from international lenders and cutting public spending and local subsidies to try and close the $100 billion deficit that opened up in its finances in 2015.

Oil-producers in the Organization of Petroleum Exporting Countries, which excludes the US, have been increasing oil production every day since November to try and squeeze out competition from new US shale oil producers. Oil production from OPEC nations stands at a record high.

Much of the increase comes directly from Saudi Arabia, which is still the world's largest exporter of oil, but other OPEC members, including Iraq and Iran, have also raised their output.

“What has become increasingly apparent is that there is a huge incentive for a number of low-cost OPEC producers to try to increase production in order to offset the damage done to their fiscal revenues by the sharp decline in oil prices,” said Dr James Nixon, chief European Economist at Oxford Economics.

But Saudi Arabia is losing its dominance. The kingdom’s oil accounted for 15 per cent of China's oil imports in 2003 and 13 per cent by 2015. South Africa’s imported 53 per cent of its oil from Saudi Arabia in 2013, but just 22 per cent by 2015 due to imports from Nigeria and Angola.

The increase in US shale importers has hit Saudi Arabia’s share of US oil imports, which fell from 17 per cent in 2013 to 14 per cent by 2015.

Saudi Arabia is expected to continue to pump oil until other oil-producing companies agree to a freeze.

In February, an agreement seemed to be getting closer when Saudi Arabia agreed to freeze production, alongside Russia, Qatar and Venezuela.

Iran, which has started exporting oil again after the lifting of sanctions, jeopardised the agreement by refusing to comply. Saudi Arabia said it would continue with the plan to freeze its output anyway.

It has also suggested it might privatise Saudi Aramco, the state oil producer, bringing the Saudi Arabian economy more in line with the workings of other modern economies. Coupled with the introduction of VAT and subsidy cuts, this would provide proper funding to the state and reduce its reliance on oil revenues at a time when other oil exporting countries are gaining ground.