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Japan Today
03-08-2025
- Business
- Japan Today
Eight OPEC+ countries raise production by 547,000 bpd
OPEC headquarters in Vienna -- analysts say the latest production increase is unlikely to raise oil prices By Pol-Malo LE BRIS Saudi Arabia, Russia and six key members of the OPEC+ alliance said Sunday they will increase production by 547,000 barrels a day in a move which analysts say aims to regain market share amid resilient crude prices. Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman, along with the Saudis and Russians -- together nicknamed the Voluntary Eight (V8) -- currently produce about 41-42 million barrels a day, so the increase is about 1.5 percent. Analysts said there was unlikely to be a major impact on prices, with the Brent reference oil currently selling at about $70 a barrel. "The eight participating countries will implement a production adjustment of 547,000 barrels per day in September 2025 from August 2025 required production level," said a statement released after a meeting where the hike was agreed. The eight key producers, who started increasing production in April, affirmed their commitment to market stability on "current healthy oil market fundamentals," an OPEC statement read. Oil prices have held up better than observers anticipated amid strong summer demand and a high geopolitical risk premium, notably owing to conflict between Iran and Israel. "OPEC+ has passed the first test -- unwinding 2.2 million barrels per day (since April) without crashing prices or compromising unity," said Jorge Leon, analyst at Rystad Energy. "But the next task will be even harder: deciding if and when to unwind the remaining 1.66 million barrels, all while navigating geopolitical tension and preserving cohesion," said Leon. The post-meeting statement said the decision came "in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories." The OPEC+ countries agreed in December to start a gradual return from last April of the 2.2 million barrels per day of previous production cuts. The latest move, a year ahead of an initial 18-month schedule, completes the unwinding and also provides for a 300,000 barrels per day tranche granted specifically to the United Arab Emirates. The statement said that "the phase-out of the additional voluntary production adjustments may be paused or reversed subject to evolving market conditions". The eight added that they will hold monthly meetings for a regular review of market conditions. For now, the return of other production cuts is to be discussed at the next OPEC+ ministerial meeting at the end of November, with all 22 members. But OPEC said the V8 will first meet on September 7. In a bid to boost prices, the wider OPEC+ group -- comprising the 12-nation Organization of the Petroleum Exporting Countries (OPEC) and its allies -- in recent years had agreed to three different tranches of output cuts, amounting to almost six million bpd in total. After a long period of producers seeking to combat price erosion by implementing production cuts to make oil scarcer, recent months have seen a shift in strategy. Prior to the announcement, UBS analyst Giovanni Staunovo had suggested the quota increase was "largely priced in" on energy markets. What happens over the next few months is less certain but ING's Warren Patterson said that the "base scenario" will see the V8 pause output hikes for the time being. For Patterson, a significant surplus may well emerge from the fourth quarter of this year, which OPEC+ would have to manage carefully. "The alliance is striving to find a balance between regaining market share and avoiding a sharp drop in oil prices," so as not to wipe out its profits, said Tamas Varga of PVM Oil Associates. Market experts warn that forecasting is particularly challenging given the uncertainty emanating from U.S. President Donald Trump's tariffs policy and its effects on global trade, as well as his 10-day deadline for Russia to end the war in Ukraine. © 2025 AFP
Japan Today
01-06-2025
- Business
- Japan Today
Oil under $65 a boon for consumers, but a burden on producers
Cargo ships outside an oil and gas storage facility at a port in Luanda, the capital of Angola By Pol-Malo LE BRIS U.S. President Donald Trump's tariffs, his call to "drill baby drill" and especially a decision by OPEC+ to hike crude output quotas have oil prices trading at lows not seen since the COVID pandemic. That is good news for consumers but not so much for producers, analysts say. A barrel of Brent North Sea crude, the international benchmark, stands below $65, a far cry from the more than the $120 reached in 2022 following the invasion of Ukraine by major oil producer Russia. Lower inflation The fall in oil prices has contributed to a global slowdown for inflation, while also boosting growth in countries reliant on importing crude, such as much of Europe. The U.S. consumer price index, for example, was down 11.8 percent year-on-year in April. Cheaper crude "increases the level of disposable income" consumers have to be spending on "discretionary items" such as leisure and tourism, said Pushpin Singh, an economist at British research group Cebr. The price of Brent has fallen by more than $10 compared with a year ago, reducing the cost of various fuel types derived directly from oil. This is helping to push down transportation and manufacturing costs that may, in the medium term, help further cut prices of consumer goods, Singh told AFP. But he noted that while the drop in crude prices is partly a consequence of Trump's trade policies, the net effect on inflation remains difficult to predict amid threatened surges to other input costs, such as metals. At the same time, "cheaper oil can make renewable energy sources less competitive, potentially slowing investment in green technologies", Singh added. Oil producers As prices retreat however the undisputed losers are oil-producing countries, "especially high-cost producers who at current and lower prices are forced to scale back production in the coming months", said Ole Hansen, head of commodity strategy at Saxo Bank. Oil trading close to or below $60 "will obviously not be great for shale producers" either, said Rystad Energy analyst Jorge Leon. "Having lower oil prices is going to be the detriment to their development," he told AFP. Some companies extracting oil and natural gas from shale rock have already announced reduced investment in the Permian Basin, located between Texas and New Mexico. For the OPEC+ oil alliance, led by Saudi Arabia and Russia, tolerance for low prices varies greatly. Saudi Arabia, the United Arab Emirates and Kuwait have monetary reserves allowing them to easily borrow to finance diversified economic projects, Leon said. Hansen forecast that "the long-term winners are likely to be major OPEC+ producers, especially in the Middle East, as they reclaim market shares that were lost since 2022 when they embarked on voluntary production cuts". The 22-nation group began a series of cuts in 2022 to prop up crude prices, but Saudi Arabia, Russia and six other members surprised markets recently by sharply raising output. On Saturday, the countries announced a huge increase in crude production for July with an additional 411,000 barrels a day. Analysts say the hikes have likely been aimed at punishing OPEC members that have failed to meet their quotas, but it also follows pressure from Trump to lower prices. That is directly impacting the likes of Iran and Venezuela, whose economies depend heavily on oil revenues. A lower-price environment also hurts Nigeria, which like other OPEC+ members possesses a more limited ability to borrow funds, according to experts. Bit non-OPEC member Guyana, whose GDP growth has surged in recent years thanks to the discovery of oil, risks seeing its economy slow. © 2025 AFP
