Record OPEC+ Fuel Exports Blunt Group’s Crude Supply Cut

By Ahmad Ghaddar

• OPEC+ supply targets only cover unrefined crude
• Increased fuel exports means more oil reaches market than required, analyst says
• Economic weakness in biggest importer China has curbed demand
• Exporting refined products gives countries increased global reach

LONDON, March 13 (Reuters) – OPEC+ has exported a record amount of refined products, blunting the impact of the group’s crude output curbs, as members including Saudi Arabia, seek to boost their revenues and market share, according to industry data and analysts.

Supply targets agreed by the OPEC+ grouping of the Organization of the Petroleum Exporting Countries and its allies, focus on unrefined crude production.

This means individual members can increase exports of fuel products – if they have enough refinery capacity – without violating pledges to the group.

Seaborne fuel exports from Gulf OPEC+ members Iraq, Kuwait, Oman, Saudi Arabia and the United Arab Emirates hit at an all-time high in 2024 of 5.51 million barrels per day (bpd) on average, data from Kpler and OilX show, more than 7% higher than the previous year.

Exports of oil products from the UAE, Saudi Arabia, Iraq, Kuwait and Oman reached a record high in 2024 of 5.5 mln barrels per day.

“A lot of countries just realise that you can make a lot more money by selling refined products … rather than exporting crude,” Kpler analyst Andon Pavlov said.

There was no immediate comment from OPEC or relevant authorities in the five countries.

The rise in supply of refined fuel means that the overall reduction in supply to global markets is smaller than the headline crude supply agreements indicate, reducing the impact of crude supply cuts, analysts say.

“In other words, in equivalent crude terms, more oil is reaching the market than required,” Rystad Energy analyst Mukesh Sahdev said.

The increase in supply of refined products is among the factors that have weighed on prices over the last two years due to weak demand growth from China, analysts say. Oil prices have fallen to around $70 this month, below the level many OPEC members need to balance their budgets.

REFINING INVESTMENT

The Gulf OPEC+ producers have been able to refine more after they invested billions of dollars in their downstream oil industries over the last decade.

Iraq, Kuwait, Saudi Arabia and the UAE increased their domestic refining capacity to 9.1 million bpd in 2023 from 6.5 million bpd in 2009.

OPEC forecasts additional global refining capacity growth of 6.3 million bpd by 2029 driven by the Middle East, Asia Pacific and Africa.

Seaborne crude exports from the five countries fell by 713,000 bpd to 14.54 million bpd in 2024 from the previous year, according to Kpler and Vortexa data. This was a result of the 2.2 million bpd output cut the nations and three other OPEC+ members made last year.

Saudi, UAE, Iraq, Kuwait and Oman crude exports fell 5% in 2024 as new cuts came into place

Taking into account the 374,000 bpd rise in oil products exports and the 713,000 bpd drop in crude exports, actual oil shipments to the market from the five countries fell by 339,000 bpd last year according to Reuters calculations based on the Kpler and Vortexa data.

OPEC+ members are holding back 5.85 million bpd of crude output, or about 5.7% of global demand, in a series of steps agreed since late 2022. They plan to unwind a portion the most recent layer of cuts starting in April.

MARKET SHARE

Through higher fuel exports, OPEC+ countries have been able to expand market share despite the crude cuts, analysts say.

Higher diesel exports from the Middle East to Europe to substitute Russian supplies lost to Western sanctions in 2022 hit profit margins for European refiners last year.

This contributed to permanent refinery closures in the region.

About 1 million bpd of refining capacity in Europe and the United States is expected to be permanently shut down this year in response to weak profits. Such closures benefit OPEC+ producers, analysts say, by giving them a bigger share of fuel markets.

“Our view is that OPEC+ is likely to push for significant global refinery closures to protect future product market share,” Rystad Energy analyst Patricio Valdivieso said.

Besides domestic investment, the biggest Gulf OPEC producers have added to their international refining and downstream assets in recent years.

In 2022 Aramco acquired a 30% stake in Polish refiner PKN Orlen’s Lotos plant, while also expanding its refining footprint in the world’s biggest oil importer China.

XRG, the international investments arm of Abu Dhabi National Oil Company, bought a majority stake in Covestro, a German chemicals maker.

The strategy of boosting fuel exports also allows the Gulf OPEC+ countries to supply more markets than if they focused solely on shipping crude.

“When you are crude producer and refiner, then you can supply the world: You can sell your LPG and naphtha to Asia, sell your gasoline to Africa and Latin America, sell your diesel and jet to Europe,” FGE Energy analyst Iman Nasseri said.

Additional reporting by Robert Harvey and Alex Lawler in London, Yousef Saba in Dubai Editing by Alex Lawler, Dmitry Zhdannikov, Simon Webb and Barbara Lewis

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