Gulf Producers' Price War Erodes OPEC's Authority
The Middle East oil producers are in a fierce battle to reclaim market share after the Iran war, which threatens to weaken oil prices and erode OPEC's authority. The UAE has fired the opening shot, with its crude exports surging to a record 3.8 million bpd in June, while Saudi Arabia is also increasing production. Iraq and Kuwait have resumed exports, each shipping around 500,000 bpd through Hormuz in June.
To attract buyers, producers are offering steep discounts - up to $20 a barrel below Brent in some cases. Saudi Arabia set the August official selling price of its flagship Arab Light crude at $1.50 a barrel below the Oman/Dubai benchmark, down from a premium of $9.50 in July.
OPEC's dilemma is that it is more fractured and vulnerable than ever before, following both the UAE's departure and the Iran war, which inflicted severe economic damage on several of its core members. The cartel may struggle to persuade fellow OPEC Gulf producers Iraq and Kuwait to curb output after months of lost revenues.