OPEC+ Market Influence Wanes Amid Mideast Conflict and Shifting Chinese Demand

Six months into a major conflict in the Middle East, the OPEC+ alliance of oil producers has seen its ability to influence global energy markets significantly diminished, according to a Reuters analysis. Severe supply disruptions and the emergence of China as a dominant demand-side force have reshaped the dynamics that have long governed oil prices.

Supply Constraints Diminish OPEC+ Clout

The ongoing war, which began in late February, has reportedly shut down the critical Strait of Hormuz export route and damaged energy infrastructure in several member states. This has directly eroded the group's market power. According to Reuters calculations based on International Energy Agency data, the OPEC+ share of global oil output fell from over 48% before the conflict to approximately 40% in July.

A portion of this decline, about four to five percentage points, is attributed to the United Arab Emirates' withdrawal from OPEC in May. The core group of seven producers, including Saudi Arabia and Russia, now represents just 25% of world oil production. While OPEC+ has announced six oil output increases since March, the export blockade has meant these decisions have had little effect on physical supply or market prices, analysts told Reuters.

China Emerges as New 'Swing' Player

In a stark shift, fluctuations in Chinese crude imports have become a primary factor balancing the market—a role traditionally held by OPEC+ as the world's swing producer. Since the war began, China has purchased roughly 400 million fewer barrels of oil compared to the same period last year, the report states.

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This demand slowdown is linked to a domestic ban on fuel exports, lower refining output, and the growing use of electric vehicles. China's weaker appetite for crude has helped place a ceiling on prices amid what analysts describe as the worst-ever supply disruption. "They’ve become the swing demand centre," said June Goh, an analyst at Sparta Commodities, in a comment to Reuters.

A New Market Paradigm

The current situation differs from previous supply shocks, such as those affecting Kuwait in the 1990s or Iraq in the 2000s, due to its scale. The outage is constraining multiple major producers simultaneously, limiting the group's ability to offset losses. Consequently, the market's focus has shifted from OPEC+ production quotas to the physical capacity for production and export from the region.

This marks a significant challenge to the influence the expanded OPEC+ framework was created to project in 2016. The original OPEC cartel's share of global output peaked at about 50% during the 1970s before falling to 30% by the mid-1980s amid rising production from non-member states.