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Yahoo
5 days ago
- Business
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After OPEC's Oil Supply Cuts, What Now?
OPEC+ will complete the unwinding of its largest production cut next month after agreeing this weekend to boost output by 547,000 barrels per day (bpd) in September in a move that was widely expected by the market and oil industry analysts. What's next for the OPEC+ oil production policy and the last remaining layer of production cuts of 1.66 million bpd is anyone's guess. The group of OPEC and non-OPEC producers, led by Saudi Arabia and Russia, left the door wide open to any further production adjustment – in either direction – and to all sorts of forecasts and analyses by market watchers and investment banks. The group of eight major OPEC+ producers agreed on Sunday, as expected, to continue with the rollback of the 2.2 million bpd cuts. This will see the alliance roll back all these cuts, and the UAE adding 300,000 bpd by the end of next month. The short-term strategy is clear. The strategy for after September—anything but. 'The big question now remains whether prices can be sustained into the autumn months as global demand slows and Trump's tariffs impact global trade,' analysts at Saxo Bank said in a note on OPEC+ producers cited 'current healthy oil market fundamentals and steady global economic outlook' to justify the continued rollback of the output cuts, as they have been doing since early spring. The group is betting on peak summer fuel demand, but this will come to an end in September. Near-term fundamentals may be strong, but the market is bracing for a major surplus once the peak demand season demand in the key crude-importing region, Asia, appears to be not as strong as OPEC+ suggests with every press release on its production policy. Crude oil imports into Asia fell in July to 25 million bpd, down from 27.88 million bpd in June, per data by LSEG Oil Research cited by Reuters columnist Clyde Russell. Asia's July crude imports slumped to the lowest monthly level in exactly a year, according to the data. China is boosting imports, but it's likely that these have been opportunistic purchases at lower oil prices when June and July-loading cargoes were arranged. Chinese refiners have been building up stockpiles in recent months, as it's estimated that China has been adding just over 1 million bpd to its stockpiles so far this year. The volatile prices and the spikes in oil in June during the Israel-Iran war may have influenced buying for cargoes set to arrive in China in August and September, and these could be lower, due to the price hikes. Looking at fundamentals, the market appears to be headed to a glut in the fourth quarter of the year, analysts concur. 'While OPEC+ policy remains flexible, we assume OPEC+ will keep its production quota unchanged after September as we expect the pace of builds in OECD commercial stocks to accelerate and seasonal demand tailwinds to fade away,' Goldman Sachs said earlier this week. The investment bank kept its oil price forecast for Brent crude, seeing the international benchmark averaging $64 over the fourth quarter of the year despite recent developments that have pushed both Brent and West Texas Intermediate higher than Goldman's Q4 target. 'We believe the group is finished with its supply hikes, as we move out of the stronger summer demand period and inventories start to rise,' ING commodities strategists Warren Patterson and Ewa Manthey said on group hasn't signaled any direction for after September, but the producers warned that the rollback of the cuts could be subject to change. 'The phase-out of the additional voluntary production adjustments may be paused or reversed subject to evolving market conditions,' OPEC said. This leaves the market hanging and guessing which geopolitical or trade event could overshadow fundamentals and warrant a new OPEC+ intervention sooner than thought. The messaging from the latest meeting is 'all options remain on the table — including bringing those barrels back, pausing increases for now, or even reversing the recent policy action,' Helima Croft, head of commodity strategy at RBC Capital Markets, told Bloomberg. The most immediate material change in market balances could be the U.S. seeking to choke off Russian supply to India and Turkey, if Putin lets the August 8 deadline to seek peace in Ukraine lapse without any action. Analysts assume that Russia and China will find a way to keep crude trade flowing after a short period of adjustment or deeper price discounts for Russia's crude. India and Turkey are more vulnerable, and if they stop buying Russian oil, OPEC+ will have to tap into the last layer of 1.66 million bpd production cuts and return them to the market sooner than planned, which is by late 2026. President Trump is threatening he would be 'substantially raising' the tariff on India as 'They don't care how many people in Ukraine are being killed by the Russian War Machine.' 'India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits,' President Trump wrote on Truth Social on Monday. The Trump Administration's potential move to severely restrict Russian oil shipments could reduce and even erase the expected surplus on the market in late 2025. But it is uncertain how long President Trump's campaign pledge 'I'll end the war in Ukraine on day one in office' will take and whether the U.S. will move to impose secondary tariffs on buyers of Russian oil. The Trump Administration wants low oil and energy prices, which would be inconsistent with hiking the barriers to Russian oil exports. Amidst all these geopolitical frictions and power plays, OPEC+ is watching and waiting for the right time to unwind the last remaining production cuts and reclaim market share lost to U.S. shale. By Tsvetana Paraskova for More Top Reads From this article on
The Star
22-07-2025
- Business
- The Star
Asia's LNG imports stay soft in July as Europe draws cargoes
ASIA's run of subdued imports of liquefied natural gas (LNG) is set to extend for another month in July, with the top-importing region on track for a tiny increase from June. Asia's imports of LNG are estimated at 22.07 million tonnes in July, up from 21.80 million in June, according to data compiled by commodity analysts Kpler. On a per-day basis July's figure is 722,000 tonnes, which is slightly down from 727,000 in June. The soft July imports continue a trend this year of declining LNG arrivals in Asia, with the first seven months of this year coming in at 155.82 million tonnes, down 6.3% from the 166.22 million over the same period last year. In contrast to Asia's declining LNG imports, Europe's have been trending higher, with the first seven months seeing arrivals of 75.61 million tonnes, up 24% from the 61.13 million for the same period last year, according to Kpler data. The extra 14.48 million tonnes of LNG headed to Europe in the first seven months reflects the continent's efforts to refill inventories ahead of winter while continuing to shun pipeline gas from Russia. The extra European demand has been a boon for LNG exporters as it has helped keep global prices higher, and largely prevented the usual seasonal decline in both volumes and spot prices seen in the shoulder season between the winter and summer peaks. But the higher prices have also led to lower demand from price-sensitive buyers in Asia, especially China, the world's largest LNG importer. China's LNG imports are on track to reach 4.96 million tonnes in July, down from 5.09 million in June and 5.92 million in July 2024, according to Kpler data. For the first seven months of the year, China's imports are estimated by Kpler at 35.17 million tonnes, down 21.2% from the 44.64 million for the same period last year. The drop in China's LNG imports also accounts for 91% of the total drop in Asia's imports in the first seven months this year. The rest of the decline can largely be ascribed to India, Asia's fourth-largest LNG buyer, with imports in the January to July period estimated at 14.08 million tonnes, down from 16.11 million for the same period last year. The decline in imports by China and India comes as spot LNG prices for delivery to North Asia remain at elevated levels. The spot price dropped to US$12.33 per million British thermal units (mmBtu) in the week to July 14 from US$12.90 the prior week. While this is similar to the US$12 per mmBtu that prevailed in the same week last year, what is different so far this year is that the lowest price so far, of US$11 in late April, is well above the low point of US$8.30 in February 2024 and US$9 in June 2023. The fact that spot prices didn't have their usual seasonal decline after the northern winter meant that Chinese buyers were unable to pick up cargoes at economical prices. — Reuters Clyde Russell is a columnist for Reuters. The views expressed here are the writer's own.
Yahoo
03-07-2025
- Business
- Yahoo
Europe's Gas Binge Leaves Asia in the Cold Again
Europe has accelerated its purchases of liquefied natural gas to refill its storage caverns for the winter, and once again, this has driven prices higher, sapping demand in Asia. This could turn into a seasonal pattern until new LNG capacity comes online—and it will definitely add to Europe's energy cost woes. Natural gas in storage in the European Union is currently at 58.90% of capacity. This time last year, gas in storage was at 75.5% of capacity, per S&P Platts data cited by Reuters' Clyde Russell this week. It needs to reach 90% by November this year, or December, at the latest, per the EU's storage target. This means that European buyers have little choice but to ramp up LNG purchases, whatever the cost—because they have no alternative. The reason, of course, is Europe's deliberate elimination of alternatives such as coal and, in the case of Germany and now Spain, nuclear. This elimination—in the name of a transition to low-emission energy generation—has reduced European countries' flexibility in sourcing their primary energy. So Europeans have been buying lots of LNG, to the tune of some 208.62 million tons over the first six months of the year, which was up by 1.7% from a year ago, Russell reported, citing Kpler figures. The inevitability of LNG purchases means that this will continue no matter what happens. For example, last month, the surge in prices was prompted by the war between Israel and Iran. With Europe still mostly unwilling to commit to long-term contracts, it has made itself vulnerable to such price swings—while Asia sticks with coal that it could fall back on should gas prices soar. In June, spot LNG prices in Asia hit a high of $14 per million British thermal units before retreating to $13.10 in the final week of the month. The war premium had a big role to play in that price jump, but so did consistently high shipments to Europe. Asian importers, meanwhile, reduced their intake in the face of higher prices. But here's the thing. China can afford to buy less LNG because it can ramp up pipeline imports from Russia and Central Asia. Europe does not have the luxury of an alternative supply. Europe, in other words, is stuck with LNG because Norway cannot boost its gas output either as fast or as high as it is necessary if Europe wants an alternative gas supply. It's worth noting, however, that many Asian energy importers have made promises to buy more U.S. liquefied gas specifically in order to avoid the tariff axe that President Trump has been waving at the world. This has limited their wiggle room, as it were, with regard to volumes. With regard to prices, however, long-term deals tend to fetch more stable prices, insulating both buyer and seller from the whims of the spot market. Even with the U.S. LNG purchase commitments, however, India has seen an 8.7% decline in its LNG imports over the first half of the year, suggesting price remains a not inconsiderable issue. China's LNG imports, on the other hand, were down a lot more sharply, by 22%. The tariff war with the United States was certainly a big factor, but Europe's demand may well have played a part as well. With European buyers willing to pay a premium to fill those storage caverns, Chinese gas traders have been happy to resell their LNG cargos, especially those coming from the U.S. and subject to new import tariffs in response to U.S. tariffs. So, chances are that Europe will continue to have to pay a premium to secure its gas reserves for peak demand season. Normally, there would not be a huge problem with that. Right now, however, Europe is spreading itself increasingly thin with spending plans, just as its heavy industries begin to raise the alarm about exorbitant energy costs. Expensive LNG is not going to do anything about these costs, and this means governments will have to step in. This, in turn, means even more spending to keep vital industries such as steelmaking alive. Asia, meanwhile, will continue to drive coal demand globally with its more open approach to energy security, prompted by the fact that most Asian countries cannot afford LNG on a whatever-the-cost basis. The problem, for Europe, is that it can't afford LNG on a whatever-the-cost basis over the long term, either. The EU's gas storage refill bill looks set to be overall higher than last year's. If this winter is as regular as the last one, this would mean an even higher storage refill bill for 2026. This would mean more support for businesses and, likely, households. At some point, wealthy Europe is going to find it's not that wealthy anymore—because of its energy policies. By Irina Slav for More Top Reads From this article on Sign in to access your portfolio
Yahoo
24-06-2025
- Business
- Yahoo
Morning Bid: Oil, rates and the dollar tumble
By Mike Dolan LONDON (Reuters) - What matters in U.S. and global markets today By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets After a tentative ceasefire was announced in the Middle East, U.S. crude, gold, Treasury yields and the dollar gave up all gains registered since Israel's initial attack on Iran on June 13. Throughout this episode, energy market worries never amounted to a true 'shock' as movements of oil were largely unaffected. And given the large global supply overhang and slowing world demand, annual U.S. oil price gains never turned positive at any point over the past 12 days, failing even to set a new high for 2025. I'll discuss all of today's market news below and then move away from the headlines to explain how plunging immigration and the graying of America may be impacting the Federal Reserve's view of the U.S. labor market. Today's Market Minute * Oil tumbled 4%, global shares surged and the dollar dropped on Tuesday as U.S. President Donald Trump said a ceasefire between Israel and Iran was in place. * However, Israeli Defence Minister Israel Katz said on Tuesday he had ordered the military to strike Tehran after Iran fired missiles in violation of the ceasefire. * Crude oil's sharp reversal of the Israel-Iran war premium shows the power of a few words from a key player to move the market, but ROI columnist Clyde Russell suggests the bigger issue here may be who played silent: Iran's allies. * Investors globally appear to be gradually reducing their exposure to dollar-denominated assets, driving the greenback down to its lowest level in years. ROI markets columnist Jamie McGeever explores where most of this selling is coming from. * Rapid growth in the installation of batteries is upending power systems across the United States. ROI columnist Gavin Maguire outlines the key battery system trends to track. Oil, rates and the dollar tumble Iran's token response to U.S. bombing of its nuclear facilities over the weekend was a well-telegraphed missile launch on U.S. bases in Qatar. That was quickly followed by U.S. President Donald Trump's acknowledgement of Tehran's intent to de-escalate and a call for a ceasefire that Israel said it would abide by. Whether that ceasefire will hold remains uncertain, with some exchanges between Iran and Israel reported this morning and the situation still tense. But as it stands before Tuesday's U.S. open, crude is just $66 per barrel - $12 below Monday's peak - and just slightly up from a two-week low of $64.38 earlier in the session. In fact, Oil is now down almost 18% year-over-year. The S&P 500 rose 1% on Monday, and futures are up another 1% before Tuesday's bell. The VIX volatility gauge is back to where it was on June 12, just above 18, with the gold price falling as well. The dollar skidded lower too, with the euro back within a whisker of 3-1/2-year highs and the yen recovering all of Monday losses. European and Asia shares surged more than 1% too. Wall Street now switches attention back home to the Federal Reserve, with Fed Chair Jerome Powell starting his two-day, semi-annual congressional testimony today just as some of his colleagues have stated turning remarkably dovish on the interest rate outlook. Trump clearly thinks the Fed should move immediately to slash rates by "two to three points". The president has been lambasting Powell on an almost daily basis for not doing so. But Trump's appointees to the Fed board, Michelle Bowman and Christopher Waller, are now both advocates of easing sooner rather than later, opening up a big split between hawks and doves at the central bank. As many as seven policymakers last week indicated that they expected no rate cuts at all in 2025. But Bowman, who recently was one of the most hawkish members of the Fed's policy making council, electrified the rates market on Monday by saying it's time to consider easing as soon as next month. "Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market," said Bowman, now Fed Vice Chair for Supervision. A parade of Fed speakers on Tuesday's slate could pour cold water on that view, but many market players think there is some jockeying for position going on at the central bank, with Trump expected to soon announce his pick to replace Powell when the Fed Chair's term expires next year. Even though Fed futures markets are still only pricing in a roughly 20% chance of a July cut, full year easing bets rose almost 10 basis points to near 60 bp after the Bowman comments and oil price retreat. Treasury yields responded quickly to the rate signals and energy relief, even with another heavy week of debt sales kicking off on Tuesday with $69 billion of 2-year notes up for grabs. Benchmark 10-year yields plunged below 4.3% for the first time in six weeks on Monday, though they've nudged back above that level again before today's bell. Elsewhere on Monday, Tesla shares jumped over 9%after the electric-vehicle maker started testing its long-awaited robotaxi service, which CEO Elon Musk has touted as a driver of Tesla's lofty valuation. US migrant halt may wipe potential job growth If you're wondering why so many U.S. Federal Reserve officials are remaining hawkish despite slowing growth, consider how the dramatic drop in immigration and the graying of America are impacting the unfolding labor market picture. Often overlooked by markets focused on the latest news about tariffs, geopolitics and energy markets, curtailing illegal immigration, a signature policy of President Donald Trump, is now starting to move the needle on the U.S. jobs outlook. The flow of migrant workers into the U.S. has effectively halted over the past year. The pace was already slowing sharply before the election but has ground to a near halt along with the rise in deportations this year. Couple that with the steadily aging population of existing workers, and it looks like a labor crunch could be on the horizon. Economists at Barclays tracking these trends reckon that 'potential' non-farm private payrolls growth - or the level of extra jobs that can be created without leading to worker shortages - could fall to less than 10,000 per month by the end of next year from more than 100,000 today. They estimate that potential job growth will fall to about 60,000 within the next six months, slowing potential economic growth to only 1.4-1.6% year-on-year through next year from just over 2% now. These numbers are pretty stark when considering that average monthly private payrolls growth has been around 172,000 over the past two years. Meanwhile, Barclays says it expects the effects of population ageing to "intensify very soon", putting even more downward pressure on jobs growth. The combined impact of the two forces is "about to create significant and persistent headwinds to potential growth in the labor force and economic activity," it said. The ingredients used to make the forecast are sobering. FLATLINING PAYROLL POTENTIAL U.S. immigration surged over the past three years, adding a net 3-4 million to the U.S. population. The roughly 2 million new workers are four times the annual rate of the immediate pre-pandemic years. These were mostly asylum-seeking or 'humanitarian' cases given temporary authorization to live and work in the U.S. In fact, over the past two years, Barclays estimated that about three quarters of average monthly private jobs gains of almost 180,000 were filled by migrant workers. But since last summer, net inflows of humanitarian migrants have fallen to nearly zero. And, on top of that, the Barclays tracker estimated current deportations to be running at about 10,000 a month. On the flipside, U.S. census projections expect the population to decline by about 50,000 in 2026 and 100,000 in 2027. The aging of the population should also cause the labor force to shrink by about 360,000 this year and next, accelerating thereafter. Tweaking the underlying assumptions leads to different outcomes, of course, but Barclays' central conclusion is that potential payroll growth should essentially flatline in the coming years, weighing on potential GDP growth. Morgan Stanley also revised down net immigration estimates to a near halt this year and next, although it expects higher payroll 'breakevens' of 70,000 in 2025 and 2026. FED HEADACHE For the Fed, an unfolding economic slowdown, compounded by a demand hit from trade war uncertainties, may be arguments for easing policy now. Trump clearly thinks it should move immediately to slash rates, and his appointees to the Fed board, Michelle Bowman and Christopher Waller, are both now advocates of easing sooner rather than later. But if worker shortages are the problem, then that creates a very different problem for the Fed. In that scenario, the Fed's full employment mandate would not be at risk, but wage pressures could aggravate still above-target price inflation. With tariff hikes already fogging up the inflation horizon, it's therefore not surprising that seven Fed policymakers anticipate keeping the central bank's main borrowing rate steady through the rest of this year at least. A hit to the labor force then could cause growth to slow, even as the employment rate stays low and inflation pressures simmer. Fed inertia may be warranted if that transpires. Chart of the day The oil market registered relatively few signs of alarm during a fortnight of intense aerial warfare between Israel and Iran that included this weekend's U.S. bombing of the latter's nuclear installations. In the context of the last 35 years of sharp oil price movements, this episode has been minor - so far at least. Today's events to watch * U.S. Q1 current account (8:30 EDT), April house prices (9:00 EDT), June consumer confidence (10:00 EDT), Richmond Federal Reserve June business surveys (10:00 EDT) * Fed Chair Jerome Powell delivers semi-annual monetary policy testimony before House Financial Services Committee (9:00 EDT) * New York Fed President John Williams, Cleveland Fed President Beth Hammack, Boston Fed President Susan Collins, Minneapolis Fed chief Neel Kashkari and Kansas City Fed boss Jeff Schmid all speak; European Central Bank President Christine Lagarde, ECB Vice President Luis de Guindos and ECB chief economist Philip Lane speak; Bank of England Governor Andrew Bailey, Deputy Governor Dave Ramsden and BoE policymaker Megan Greene speak * U.S. Treasury sells $69 billion 2-year notes * U.S. corporate earnings: FedEx, Carnival Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (by Mike Dolan; editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
18-06-2025
- Business
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Oil Prices Jump, But Middle East Oil Keeps Flowing Uninterrupted
Oil prices continued to rise on Tuesday afternoon, following a dip in Monday's trading session. Today's oil price action follows Friday's biggest intraday surge in three years following the Israeli strikes on Iran. The market's worst fear—a major supply disruption in the Middle East—hasn't materialized yet. And it may not, as was the case in the previous Israel-Iran flare-ups in recent years. Oil prices spiked by 13% immediately after Israel hit Iran's nuclear facilities and uranium enrichment sites early on Friday. The gain eased to 7% at close on Friday. Then oil prices retreated on Monday as no major oil supply route or infrastructure in the world's most important crude-producing region was affected after four days, and as reports emerged that Iran had signaled it seeks an end to hostilities and a return to nuclear talks if the U.S. stays out of the conflict. As in previous such flare-ups in the Middle East, market speculators fear a disruption to supply and bet on rising oil prices. In a sign that the world hasn't lost a single barrel of oil from the region so far, the physical Dubai prices rose on Friday less than the Brent Crude futures. Actual consumers of the Middle East's oil appear less concerned than the futures traders in Brent, Reuters columnist Clyde Russell of Tuesday, no major oil export infrastructure has been hit, and the Strait of Hormuz—the most vital crude flows lane—remains open to navigation. Despite Iran's on-and-off threats to close the Strait of Hormuz, where a fifth of global daily crude consumption passes every day, the narrow lane has never been blocked in any previous conflict in the Middle East. Analysts don't think this will be the one that will lead to a closure of the Strait. 'We think 'closure of the Strait' has emerged as something of a market straw man scenario' in recent trading, analysts at RBC Capital Markets said in a note earlier this week. However, oil supply from the Middle East could become vulnerable if the two sides decide to attack vital energy infrastructure in the region, the analysts noted, warning that energy, and oil in particular, are now 'clearly in the crosshairs.' 'The fact that both sides targeted energy infrastructure on the second day of fighting represents a clear cause for concern,' the analysts wrote in the note carried by Bloomberg. Iran's Kharg Island—a major crude terminal and trade hub handling 90% of Iranian crude oil exports, could be targeted by Israel at some point, RBC says. Iranian proxies, for their part, could target oil facilities in neighboring Iraq, OPEC's second-largest oil producer after Saudi Arabia, according to the bank. 'The White House has probably sought to dissuade Prime Minister Netanyahu from a Kharg Island strike, given that it could remove 90% of Iranian oil exports,' the bank's analysts wrote. The oil market's biggest fear—the closure of the Strait of Hormuz—appears a distant prospect for now, analysts say, although they acknowledge that if oil flows are disrupted in the Strait, oil prices could easily hit $100 per barrel. In the absence of a Middle East supply disruption, Brent prices may struggle to stay above $70 a barrel, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Monday. So far, there haven't been direct strikes on oil infrastructure or export facilities. This, combined with oil failing to surpass Friday's price peaks—$78.50 Brent and $77.60 WTI —invited profit-taking and hedging flows from producers early this week, Hansen commented. 'Still, the unfolding conflict presents a binary risk scenario: uninterrupted flows could trigger a sharp $10 correction, while any disruption to Iranian exports or a worst-case scenario blockade of the Strait of Hormuz could send prices soaring.' The current oil price levels in the low $70s per barrel would only be justified if an actual supply disruption materializes, Hansen noted. The Israel-Iran conflict appears likely to be contained and the United States could potentially play a central role, Mukesh Sahdev, Rystad Energy's Global Head of Commodities Markets – Oil, said on Monday. 'A blockade remains the key risk that could push markets into uncharted territory,' Janiv Shah, Rystad Energy's Vice President, Commodities Markets – Oil, commented, referring to a potential blockade of the Strait of Hormuz. However, 'Given its interest in keeping prices closer to $50, the US could play a stabilizing role,' Shah added. 'We maintain our view that this is likely to remain a short-lived conflict, as further escalation risks spiraling beyond the control of key stakeholders,' Shah said. Oil prices continued to trade the war premium on Tuesday, amid uncertainties about how the conflict will evolve, with U.S. President Donald Trump leaving the G7 summit in Canada early and urging 'everyone' in Tehran to evacuate immediately. Yet, the oil market isn't pricing a worst-case scenario of a blockade of the Strait of Hormuz that would choke off a large part of global supply—and it probably shouldn't. By Tsvetana Paraskova for More Top Reads From this article on
