Gulf producers are shifting from a military crisis to a fight over market share, ramping output and slashing official selling prices to win back Asian buyers. Saudi Aramco cut its August Arab Light premium to Asia by $11/bbl, and analysts at Mirae Asset Sharekhan see Brent trading in a $68–75/bbl range in Q3 2026 with downside risks.
Middle East oil producers have traded a military conflict for a price war, and they are willing to accept lower prices to keep their customers. After a period of severe geopolitical disruption between March and May, Gulf producers are rapidly increasing output to reclaim buyers and replace volumes covered by strategic petroleum reserves during the crisis, according to Mirae Asset Sharekhan research analyst Mohammed Imran.
OPEC+ chooses volume over price
The producer alliance has pivoted toward defending market share. OPEC+ still accounts for roughly 40% of global crude supply, excluding the UAE, yet recent decisions suggest the group will tolerate weaker prices to stay relevant. Its move to raise August output by 188,000 bpd marks the fifth straight monthly increase.
Saudi Arabia's pricing shows the shift most clearly. Saudi Aramco cut the August official selling price for Arab Light crude to Asia to just $1.50/bbl above the Oman-Dubai benchmark, an $11/bbl reduction from July. That is the sharpest monthly cut in more than two decades, aimed at defending Asian sales against discounted Iranian crude and Russian ESPO exports.
Supply normalizes as the UAE gains
Headline increases look modest, but they mask how far shipments fell. OPEC+ production dropped to 33.13 mbpd in May from 42.77 mbpd in February as export bottlenecks and storage limits bit, so current gains are a normalization rather than a flood. The UAE has emerged as a structural winner, lifting output to about 3.9 mbpd after leaving OPEC+ constraints, with its 1.5 mbpd Habshan–Fujairah pipeline routing exports around the Strait of Hormuz.
Demand, meanwhile, is splitting. Crude imports into China and Japan fell by around 40% during the crisis, and China's recovery is capped by electrification. EVs took 42% of Chinese car sales in May. India's fuel demand proved more resilient as state refiners absorbed margin losses to hold pump prices.
Inventories tell a tighter story
Stock draws point the other way. Global inventories have drawn at an average 3.8 million bpd since the conflict began, and OECD government stocks fell 163 million barrels to their lowest since December 1990, per the IEA June report. The US SPR was drawn down roughly 89.5 million barrels to 325 million barrels, the lowest since 1984.
Positioning has cooled all the same. CFTC data showed money managers cut net-long WTI exposure by 6,582 contracts to 93,713 contracts in the week ending June 30. Mirae Asset Sharekhan expects Brent to trade within $68–75/bbl in Q3 2026, with risks skewed modestly to the downside.
Source: Business Standard
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