Value per barrel matters more than volume

MUSCAT, OCT 24
The gap between this year’s sharp rise in Oman’s oil production and its far slower export growth should not be read as a simple shift towards refining, Ali bin Abdullah al Riyami, former Director General of Marketing at the Ministry of Energy and Minerals, told the Observer.
Oman’s oil production rose 11.9 per cent to about 270 million barrels in the first eight months of 2026, while exports grew only 1.9 per cent to about 209 million barrels. Over the same period, total refinery output in the Sultanate of Oman fell 2.4 per cent to about 150 million barrels.
“I cannot say that higher refining alone explains the gap between production and export growth; the oil arithmetic does not work that simply,” he said, pointing to domestic consumption, refinery feedstock, changes in inventories and time lags between when oil is produced and when cargoes are loaded and recorded as exports.
Al Riyami said Oman has a clear direction towards maximising the value added from oil rather than simply exporting crude, a trend reinforced by the scale of the Duqm refinery. The refinery has been running at about 255,000 barrels per day (bpd) this year, around 110 per cent of its 230,000 bpd design capacity, he said.

In his view, the more important question is how much value Oman earns from each barrel, not how many barrels of crude it exports or refines.
“What counts is not the number of barrels we export, but the value we achieve from each barrel,” he said.
Refining makes sense when margins are good and demand for diesel, jet fuel or naphtha is strong, he said, while selling crude makes sense when it brings a better economic return in a given period.
“Successful marketing, in the end, is the ability to direct the barrel to the place, the use and the market that achieve the best value,” he said.
With production, refining, storage, ports and a distinctive geographical location, Oman has an opportunity bigger than exporting crude alone, he believes. “If all these elements are linked through an integrated commercial and marketing policy, we move from the concept of exporting oil to the concept of trading energy and maximising value from it.”
Al Riyami, who began working in oil marketing in 1998, has seen nearly three decades of sometimes sharp shifts in the market, from the late-1990s price collapse and the 2008 global financial crisis to the Covid-19 demand collapse of 2020 and the fallout of the Russia-Ukraine war since 2022.
“What I have learned over these years is that every oil crisis has its own fingerprint,” he said. In some, the problem was weak demand; in others, oversupply; at other times, geopolitics dominated.
This year’s crisis is harder to handle, he said, because geopolitics, logistics, economics and security of supply are all at play at once.
“In previous crises, the imbalance was in supply or demand. In 2026, the challenge extends across the entire supply chain, from the field to the tanker and from the refinery to the consumer,” he said.
The question is no longer only whether there is enough oil in the market, but whether it can reach the consumer at the right time and the right cost, he said. Disruption to shipping lanes, higher freight and insurance costs, changing tanker routes and uneven availability of refined products between regions have all become a direct part of pricing.
“Sometimes the barrel is there, but the problem lies in moving it, or in where it is located,” he said. One market may face shortages and rising prices while volumes are available in another, which is where flexibility in marketing, shipping, storage and contract management matters, he added.
It is not in the interest of producing countries for prices to rise to excessive levels for long periods, he said. While a good price matters to producers, a very high one may eventually become a negative, raising inflation, weighing on economic growth and weakening demand for oil.
“From my experience, a stable market at a fair price, acceptable to both producer and consumer, is far better than a sharp rise followed by a sharp collapse,” he added.