Rapidly evolving and influential developments in the global oil markets gave an aura of extreme importance to the annual energy conference organised by the Emirates Centre for Strategic Studies and Research this week. Held in Abu Dhabi, it discussed an important issue related to the GCC oil in the world energy markets in terms of continuity and change.

Those are two quite expressive words — continuity and change. Since it is known that marketing GCC oil is facing stiff competition from more than one energy provider, especially in the current circumstances when the market is saturated and there is a surplus of 2.5 million barrels per day. This has prompted some producers, including Iran and Iraq, to offer steep discounts to increase their share of exports to the Asian market, which is the most important destination for marketing Gulf oil. Also, the increase in the US shale oil production constitutes another challenge for oil prices, which have lost more than 55 per cent of their value in less than one-and-a-half years.

In parallel, the global economic slowdown, even for some major oil consumers such as China, India and Brazil and the European Union countries, puts new further pressure on oil prices and leading to escalated competition and the offering of ever more discounts to get a higher proportion of orders from importing countries.

These changes have prompted the GCC countries to take strict measures to maintain their export shares, despite the pressures applied on them during the Opec meetings to reduce their production and increase prices. The GCC states were able to ensure continued exports as per the quota prescribed within the Opec ceiling and not lose their traditional customers in the international markets.

Meantime, the GCC’s strategy has led to a drop in the competitiveness of shale oil, especially after production platforms started to decline because of their unfeasibility resulting from high production costs in a low oil price environment.

Right strategy

US shale oil production is expected to fall by 540,000 barrels per day in 2016, which will reduce the surplus, while the International Energy Agency expects demand for oil will increase by 1.5 million barrels a day the same year, which means oil prices are more likely to rise gradually in medium term.

By adopting this right strategy for production and marketing, the GCC countries can cope with changes in oil markets and maintain their position as the world’s largest oil producing and exporting bloc, which will have major impact on their development programmes and its role in determining Opec policies.

This strategy is a positive not just for the GCC states but for the global economy as a whole, since price volatility would harm economic stability. This is why GCC states have sought to embrace rational and flexible policies, taking into account the interests of producers and consumers alike.

They have played a major role in stabilising production and consequently prices in different periods, thus creating a sort of stability in the global economy. This is much removed from any radicalism in decision-making, which was called for by some Opec members.

New perceptions

The 21st Energy Conference was an important occasion not only to discuss issues affecting GCC economies, but an opportunity to discuss adopted policies and validate their soundness by specialists from different countries.

It was also important to put new perceptions of any future changes in the oil markets and that may require a policy rethink. This applies as much to technical factors as to geopolitical developments.

This requires GCC countries to work together to maintain their positions and strengthen their gains in markets where competition, contradictions and conflicts intensify between different parties and reflect the importance of oil as a primary source of energy.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.