JEDDAH: The Organization of the Petroleum Exporting Countries’ (OPEC) job to restore the balance of the oil market just got harder as more output is expected to come from shale oil producers in North America with oil prices settling now at around $50.
OPEC is not sure that the market will rebalance this year if more production from shale oil producers can offset the group’s efforts to bring down global inventories, an OPEC source told Arab News.
The source said that there are risks to the deal from supply from other OPEC members such as Libya and Nigeria that are exempted from the production cut targets, due to their security issues and unstable production situation.
OPEC is now trying to conduct more studies on the impact of shale oil in the market and the findings of these studies will be presented to the ministers of the committee that monitors the agreement to cut production in their next meeting, the source, who asked not to be named because he is not authorized to speak to media, added.
The committee known as the Joint Ministerial Monitoring Committee, or JMMC, will probably convene in Vienna next month to review market developments since the last meeting in Russia in July, the source said. Shale crude oil production from seven major US oil plays is expected to reach a record in September. The US Energy Information Administration (EIA) said on Aug. 14 in its monthly drilling productivity report that it expects shale oil production to climb by 117,000 barrels per day (bpd) in September.
The EIA said last week that US production in the week ending Aug. 11 hit 9.5 million bpd, a level not seen since 2015, according to Bloomberg’s estimates. “$50 a barrel is still a pretty critical number and that number is going to be even more critical as we move into next year,” Tortoise Capital Advisors’ Rob Thummel told Bloomberg on Aug. 2.
Some analysts, however, expect shale oil production not to grow by as much as many in the industry believe that the cost of production for shale is also increasing. Standard Chartered’s analyst Steve Brice told Bloomberg TV on Aug. 22 that shale oil will stabilize this year at current levels unless oil prices increased from current levels.
Balancing the oil market could be jeopardized by shale
Balancing the oil market could be jeopardized by shale
Saudi ports brace for cargo surge as shipping lines reroute
RIYADH: Preliminary estimates suggest that several global shipping lines could reroute part of their operations to Saudi Arabia’s Red Sea ports, potentially adding 250,000 containers and 70,000 vehicles per month, according to Rayan Qutub, head of the Logistics Council at the Jeddah Chamber of Commerce, in an interview with Al-Eqtisadiah.
“Any disruption in the Strait of Hormuz not only affects maritime traffic in the Arabian Gulf but could also reshape global trade routes,” Qutub said, highlighting the strait’s status as one of the world’s most critical maritime chokepoints for energy and goods transport.
With rising regional tensions, international shipping companies are reassessing their routes, adjusting shipping lines, or exploring alternative sea lanes. This signals that the current challenges extend beyond the Arabian Gulf, impacting the global supply chain as a whole.
Limited impact on US, European shipments
The effects of these developments will not be uniform across trade routes. Qutub noted that goods from China and India, which rely heavily on routes through the Arabian Gulf, are most vulnerable to disruption. In contrast, shipments from Europe and the US typically traverse western maritime routes via the Suez Canal and the Red Sea, making them less susceptible to regional disturbances.
Saudi Arabia’s strategic location, he emphasized, strengthens the resilience of regional trade. The Kingdom operates an integrated network of Red Sea ports — including Jeddah, Rabigh, Yanbu, and Neom — that have benefited from substantial infrastructure upgrades and technological enhancements in recent years, boosting their capacity to absorb increased cargo volumes.
Red Sea bookings
Several major carriers, including MSC, CMA CGM, and Maersk, have already opened bookings to Saudi Red Sea ports, signaling a shift in operational focus to these strategically positioned hubs.
However, Qutub warned that rerouted shipments could increase sailing times. Cargo from Asia, which normally takes 30-45 days, might now require longer voyages via the Cape of Good Hope and the Mediterranean, potentially extending transit to 60-75 days in some cases.
These changes are also reflected in rising shipping costs, driven by longer routes, higher fuel consumption, and increased insurance premiums — a typical response when global trade patterns shift due to geopolitical pressures.
Qutub emphasized that Saudi Arabia’s transport and logistics sector is managing these developments through coordinated government oversight. The Ministry of Transport and Logistics, the Logistics National Committee, and the Logistics Partnership Council recently convened to evaluate the impact on trade and supply chains. Regular weekly meetings have been established to monitor developments and implement solutions to safeguard the stability of supplies and continuity of trade.
He noted that the Kingdom’s logistical readiness is the result of long-term strategic investments, encompassing ports, airports, road networks, rail systems, and logistics zones. Today, Saudi logistics integrates maritime, land, rail, and air transport, enabling a resilient response to global disruptions.
Qutub also highlighted the need for the private sector to continuously review logistics and crisis management strategies, develop alternative plans, and manage strategic stockpiles. Such measures are essential to mitigate temporary fluctuations in global trade and ensure smooth supply chain operations.
