Domestic oil burn spikes in countries like Saudi Arabia, Iraq, and Kuwait, limit export capacity. This has driven the acceleration of additions in May and June and could lead to further increases into July. If so, more than half of the 2.2 million b/d may return to the market. The alternative narrative suggested by some - that this has been a strategic gift to Trump to lower oil prices ahead of his Gulf visit or is a move to rein in U.S. shale ambitions – I think is overstated. Saudi Arabia and other core OPEC+ members had planned this tapering well before. Cuts were extended into Q1 to draw down inventories amid weak demand. Whether or not those drawdowns materialized depends on the data source. The accelerated tapering now is more about restoring discipline and front-loading additions before demand spikes. On the market share argument, the recent increase in Aramco’s Official Selling Prices to Asia shows they’re not aggressively pushing barrels. Also, when we look at actual additions since April, these have fallen short of paper quotas as some members are already overproducing.
Is compliance by Iraq and Kazakhstan still a challenge?
Iraq will struggle as temperatures rise and power demand surges. They’ll need to burn more crude to meet electricity needs amid an ongoing power crisis. Kazakhstan faces its own hurdles, especially in negotiating cuts with IOCs like Chevron and ExxonMobil. While both countries say they aim to comply, actual reductions are much harder to achieve than they appear on paper.