Gulf oil exporters need to rebuild their reputation for reliability even as they compete to reclaim market share in an increasingly competitive energy market, International Energy Agency executive director Fatih Birol said.
"They need to regain their reputation as reliable exporters," Mr Birol said in an interview at IEA headquarters in Paris.
Saudi Arabia and the UAE have restored the bulk of the output they lost when the Strait of Hormuz was closed, with Abu Dhabi's exports climbing to about 4.3 million barrels a day by early June from 1.9 million in March, according to IEA data. That is close to 85 per cent of prewar levels, helped by the Habshan-Fujairah pipeline and the Mandous storage complex, both built to bypass the strait. Saudi Arabia more than doubled flows through its Red Sea outlet at Yanbu, to over 5 million barrels a day from 2 million.
Producers are also jockeying for market share as they rebuild. Saudi Aramco cut its official selling price to Asia by $11 a barrel for August, its steepest cut on record, after ceding ground to UAE, Kuwaiti and Iraqi barrels offered at even deeper discounts since the UAE's exit from Opec+ in May. The UAE, which has among the lowest fiscal breakevens in the region, is seen as best placed to sustain the competition.
Trust, not price, is becoming the scarcer commodity, according to Mr Birol. "The vase is broken," he said, referring to a Turkish proverb. A vase can be glued back together, he said, but the crack remains. "The Strait of Hormuz is closed once, and it can be closed again. It is now in everybody's mind."
Even a full, unconditional reopening of the strait won't erase that recalibration among buyers, Mr Birol said. That risk resurfaced this week, when Iran-linked strikes hit three tankers in the strait, including a Qatari LNG carrier and a Saudi-flagged vessel, prompting Washington to call Tehran's actions "wholly unacceptable" and revoke the licence that had allowed Iranian oil sales, reinstating sanctions weeks after a fragile ceasefire framework was signed.
"The escalation this week underlines the high degree of uncertainty over the situation in the Strait of Hormuz and the region and the ongoing risks for global energy supplies," Mr Birol said. "Whether the conflict intensifies further or a lasting peace agreement is eventually reached, I don't think it will stop the larger shifts already taking place in the energy landscape, resulting from the two major international supply shocks of 2022 and 2026."
Sanctions continue to carry weight, Mr Birol said, if not always the weight intended. "For Russia, it did have an important role. Maybe it didn't fulfil all the expectations for the people who imposed the sanctions, but it did play an important role, but not the one that people had in mind," he said.
The IEA projects global oil supply will fall 3.9 million barrels a day this year, with a full recovery not arriving until 2027, while the IMF expects inventories to hit a five-year low by July. Mr Birol credited part of the recovery to the IEA's own 400-million-barrel release on March 11, the largest coordinated stock release in its history, and to Riyadh and Abu Dhabi's pipeline plans, due for completion by 2027.
On Iran, Mr Birol was cautious about a return to 1.8 million bpd of pre-war exports. Rebound will factor on the full opening of Hormuz as well as Chinese demand, where electric vehicles now make up two-thirds of new car sales. "It will come slowly but surely," he said of oil's long-term role in transport.
Asked whether Washington's "energy dominance" doctrine sits uneasily with the IEA's transition mandate, Mr Birol cited growth in their membership ranks instead. Nigeria has just joined the IEA along with Brazil and India.
"We stick to data, and we report the data, without fear, without favour," he said. "This credibility you cannot buy with money."
