An analysis published by the Energy Now Media website, quoting Reuters, suggested that the Organization of the Petroleum Exporting Countries (OPEC) was among the most prominent losers in the race of Gulf oil producers to regain market shares after the Iranian war, amid fears of oversupply, falling prices and erosion of the organization's ability to control production.
And according to analysis by Reuters columnist Ron Bosso, Gulf oil producers are rushing to export the millions of barrels accumulated in tankers and storage facilities during the de facto closure of the Strait of Hormuz, in an effort to offset revenues that have fallen during the war months and resume damaged production operations.
UAE, Saudi Arabia race to boost exports
And the report pointed out that the UAE led the move, as its oil exports rose to a record level of 3.8 million barrels per day last June, according to data from the company "Kepler", after the partial reopening of the strait after the U.S.-Iranian memorandum of understanding signed on June 17.
And this comes after Abu Dhabi's decision to withdraw from OPEC last May, following nearly six decades of membership, which gives it greater freedom to determine its production levels away from the organization's restrictions.
And in contrast, Saudi Arabia increased its exports to 4.5 million barrels per day in June, the highest level since the outbreak of the war, while the report expected shipments to rise during July to 6.4 million barrels per day, approaching pre-war levels.
Iraq and Kuwait have also resumed oil exports after cutting a large part of their production during the conflict, each shipping about 500,000 barrels per day through the Strait of Hormuz in June.
And according to Kepler data contained in the report, oil exports across the strait increased by about four times during June compared to May, to reach about 4.2 million barrels per day, and rise to about 10.5 million barrels per day when calculating shipments through ports that exceed the strait, compared to an average of about 17 million barrels per day before the war.
Discounts up to $20 per barrel
And the report pointed out that the return of supplies at a rapid pace, in exchange for a slower recovery in demand, prompted Gulf producers to compete for buyers, after refineries in Asia and Europe provided the bulk of their needs until the end of August.
And to attract buyers, oil producers began offering big discounts that in some cases amounted to $20 a barrel below the price of Brent crude, according to traders quoted in the report.
And Saudi Arabia reduced the official selling price of its Arab light crude for August shipments to one and a half dollars below the reference price of Oman and Dubai, after it was sold at a premium of $ 9.50 in July. The report described this level as the lowest since June 2020, and the largest monthly reduction in at least two decades.
And he pointed out that some independent Chinese refineries benefited from reduced shipments, while Abu Dhabi National Oil Company (ADNOC) expanded its sales to markets where it did not have a large presence, including Nigeria, Turkey and the west coast of the United States.
OPEC faces dilemma over production cuts
And the analysis stated that the war and the Emirati withdrawal increased divisions within OPEC and weakened its position, at a time when seven major OPEC+ countries, including Russia, agreed to increase production by 188,000 barrels per day as of August, bringing the cumulative increases announced since the beginning of the war to about 800,000 barrels per day.
But the actual increase in supplies could exceed market capacity, with the International Energy Agency predicting that global oil supply will exceed demand by about 5 million barrels per day next year.
And as the de facto leader of OPEC, Saudi Arabia is having a hard time convincing Iraq, Kuwait and other Gulf producers to cut production after months of revenue losses, especially given the ability of some countries to use alternative export routes during the Strait of Hormuz crisis.
And that leaves Riyadh with two difficult choices: allowing member states to increase their output, which could further depress prices, or pushing for mass production cuts, which could expose the organization’s limited ability to enforce discipline among its members.
And the analysis pointed out that Iraq has already publicly discussed the possibility of withdrawing from OPEC if the organization does not allow Baghdad to significantly increase its production.
And he concluded that the Gulf competition to regain market shares after the war may accelerate the decline in OPEC's influence, and limit its ability to manage the global market and influence price levels, at a time of increasing pressure caused by the abundance of supply and slowing demand growth.
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