By Nikhil Dedha, Singapore, April 30
The dominance of OPEC in the global oil market is gradually weakening, and the current supply disruption linked to the Strait of Hormuz could take up to six to nine months to normalise, said June Goh, Senior Oil Market Analyst, Sparta Commodities.
In an exclusive conversation with ANI on Thursday, Goh said the reduced influence of OPEC is not a sudden development but a trend that has been evolving over the years, particularly with the rise of US shale production.
"I think the trend started from back in the 2010s when US Shale became a big thing, and in the 2020s, there was another re-emergence of US crude being politically available in the market... So there is already a reduced dominance of OPEC plus in the oil market since then," she said.
She added that with the UAE now looking to increase its production capacity to 5 million barrels per day by 2027, OPEC+ is likely to have "lower significance" in the global market, although it will still remain a powerful player.
On oil prices, Goh said the impact of the UAE's exit from OPEC will differ in the short and long term. In the near term, she said there will be no significant impact due to the ongoing supply disruption.
"In the short term, there is no material impact... the shortfall of crude diversity in the market is like 1 billion barrels," she said, referring to the current supply crunch caused by the Strait of Hormuz situation and production shut-ins.
However, over the longer term, she said the impact could be more visible, especially if the market moves into an oversupply phase.
"If in the future we come to a situation where we're in an oversupply world again... UAE can now produce as much as they need... and that will basically put a ceiling to whatever oil price in the future," she said.
Goh also noted that while more countries have left OPEC in recent years, including Qatar and Angola, it remains uncertain whether others will follow, as not all producers have the same capacity or influence as the UAE.
On India, she said the country may benefit from greater availability of UAE crude, but not necessarily cheaper prices.
"Again, it's not to say cheaper, it's more available... it is not always a given that the UAE barrels will be cheaper," she said, adding that pricing will depend on market conditions.
She also pointed out that UAE crude can be traded more flexibly on a spot basis, which could offer India opportunities depending on market dynamics.
On supply recovery, Goh emphasised that the reopening of the Strait of Hormuz is a key precondition. She estimated that restarting production could take around one to two months, but delays in reopening could extend this timeline further.
Commenting on the recent surge in oil prices, she said the market is now reacting to real supply shortages.
"The reality is hitting the markets in its face, and now we are seeing the oil price impact showing the same," she said, adding that a continued blockade could push prices higher.
On overall normalisation, Goh said earlier estimates of three to six months are now being revised.
"I probably extend that now to like six to nine months because it's really getting beyond anyone's imagination," she said.
- ANI
Reader Comments
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.
Leave a Comment