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OPEC's Market Share Sinks, No Sign of Wavering on Supply Cuts

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria July 1, 2019. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria July 1, 2019. REUTERS/Leonhard Foeger/File Photo
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OPEC's Market Share Sinks, No Sign of Wavering on Supply Cuts

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria July 1, 2019. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria July 1, 2019. REUTERS/Leonhard Foeger/File Photo

OPEC's share of the global oil market has sunk to 30 percent, the lowest in years, as a result of supply restraint and involuntary losses in Iran and Venezuela, and there is little sign yet producers are wavering on their output-cut strategy.

Crude oil from the Organization of the Petroleum Exporting Countries made up 30 percent of world oil supply in July 2019, down from more than 34 percent a decade ago and a peak of 35 percent in 2012, according to OPEC data.

Despite OPEC-led supply cuts, oil has tumbled from April's 2019 peak above $75 a barrel to $60, pressured by slowing economic activity amid concerns about the US-China trade dispute and Brexit.

The decline in prices, should it persist, and erosion of market share could raise the question of whether continued supply restraint is serving producers' best interests.

OPEC and its allies have a deal to limit supply until March 2020.

The group tried to defend its market share under the previous Saudi oil minister, Ali al Naimi, who sharply ramped up production in a pump war campaign in 2014.

Naimi was hoping to win the battle, arguing that OPEC's output was the world's cheapest and would allow the group to outdo other producers such as the United States.

As a result of his strategy OPEC's market share rose, while oil prices crashed to below $30 a barrel, triggering many bankruptcies of US oil firms and over-stretching the Saudi budget.

Riyadh and OPEC were forced to return to output cuts in 2017 to support prices, and sources within OPEC say there is no sign of any willingness to return to a pump war at the moment.

"Saudi Arabia is committed to do whatever it takes to keep the market balanced next year," a Saudi official said on Aug. 8. "We believe, based on close communication with key OPEC+ countries, that they will do the same."

OPEC, Russia and other producers have been restraining supply for most of the period since Jan. 1, 2017. The alliance, known as OPEC+, in July renewed the pact until March 2020.

While helping to boost prices, OPEC's market share has fallen steeply in the last two years. World supply has expanded by 2.7 percent to 98.7 million barrels per day, while OPEC crude output has fallen 8.4 percent to 29.6 million bpd.

While OPEC agreements apply to production, OPEC's exports are also falling as a percentage of world shipments, according to data from Kpler, which tracks oil flows. Iran has led the decrease in recent months.

Nonetheless, Swedish bank SEB said that for now OPEC+ still has room to act, as the countries making most of the voluntary curbs - Russia, Saudi Arabia, Kuwait, UAE and Iraq - are still pumping at relatively high rates.

Venezuela and Iran, under US sanctions and being forced to curb shipments, have delivered the bulk of the cuts. Venezuelan supply was already in long-term decline before Washington tightened sanctions this year.

The active cutters are not very stretched at all," SEB analyst Bjarne Schieldrop wrote in the report. "They have not lost market share to US shale. Venezuela and Iran are the big losers."

While Saudi Arabia holds the biggest sway in OPEC as its largest producer, some in the group are not convinced further OPEC+ action to support prices will happen or would work.

"I really doubt there will be further action," an OPEC delegate said. "If it did happen, it will have a temporary impact because the driver is trade and the economy."

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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.

Business

Aljadaan: Emerging Markets Account for 70% of Global Growth

Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
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Aljadaan: Emerging Markets Account for 70% of Global Growth

Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat

Saudi Minister of Finance Mohammed Aljadaan stressed Sunday that the world economy is going through a “profound transition,” saying emerging markets and developing economies now account for nearly 60 percent of the global Gross Domestic Product (GDP) in purchasing power terms and over 70 percent of global growth.

In his opening remarks at the AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the IMF in AlUla, the minister said these economies have become an increasingly important driver of global growth with their share of global economy more than doubling since 2010.

“Today, the 10 emerging economies in the G20 alone account for more than half of the world growth. Yet, they face a more complex and fragmented environment, elevated debt levels, slower trade growth and increasing exposure to geopolitical shocks.”

“Unfortunately, more than half of low income countries are either in or at the risk of debt distress. At the same time global trade growth has slowed at around half of what it was pre the pandemic,” Aljadaan added.

The Finance Minister stressed that the Saudi experience over the past decade has reinforced three lessons that may be relevant to the discussions at the two-day conference, which brings together a select group of ministers and central bank governors, leaders of international organizations, leading investors and academics.

“First, macroeconomic stability is not the enemy of growth. It is actually the foundation,” he said.

“Structural reforms deliver results only when institutions deliver. So there is no point of reforming ... if the institutions are unable to deliver,” he stated.

Finally, he said that “international cooperation matters more, not less, in a fragmented world.”

Business

Georgieva from AlUla: Growth Still Lacks Pre-pandemic Levels

Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
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Georgieva from AlUla: Growth Still Lacks Pre-pandemic Levels

Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Sunday that world growth still lacks pre-pandemic levels, expressing concern as she expected more shocks amid high spending and rising debt levels in many countries.

Georgieva spoke at the AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the IMF in AlUla.

The two-day conference brings together a select group of ministers and central bank governors, leaders of international organizations, leading investors and academics to deliberate on policies to global stability, prosperity, and multilateral collaboration.

Georgieva said that the conference was launched last year in recognition of the growing role of emerging market economies in a world of sweeping transformations.

“I came out of this gathering .... With a sense of hope for the pragmatic attitude and determination to pursue good policies and build strong institutions,” she said.

Georgieva stressed that “good policies pay off,” and said that growth rates across emerging economies reached four percent this year, exceeding by a large margin those of advanced economies that are around 1.5 percent.