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International Business Times
a day ago
- Business
- International Business Times
Oil Prices Rise on OPEC+ Output Decision, Geopolitical Risks, and Supply Disruptions
Global oil markets gained fresh momentum this week as geopolitical flashpoints and steady supply decisions combined to push prices higher. From the war-torn east of Europe to fire-ravaged Canada, a confluence of events is constricting the world's crude supplies, with traders braced for more volatility. Brent crude futures rose 0.9% to $65.21 a barrel, while U.S. West Texas Intermediate crude increased 1.1% to $63.19. The gains followed OPEC+'s decision to maintain its 411,000 barrels per day production increase for July, continuing the same hike from the previous two months. Market analysts had expected a larger increase, which could have added more pressure on already falling prices, but the steady rise helped calm investors. The global oil market remains tight, and geopolitical factors further complicate the supply outlook. Over the weekend, Ukraine intensified drone strikes that it carried out against Russia, causing damage to critical infrastructure and taking down an estimated 10% of the country's refining capacity, according to Russia's government. The news added a risk premium to oil prices, as traders watch the conflict and how it affects Russian exports. Meanwhile, Iran is poised to reject a proposed nuclear pact with the United States. The proposal, which sought to roll back long sanctions for an end to uranium enrichment, has been rejected in Tehran for not meeting its core demands. A collapse of the talks would probably bar the return of Iranian oil to the global market, deny supplies, and prop up prices. In North America, a series of wildfires in Canada's Alberta province have also interrupted about 350,000 barrels a day of oil sands production, representing around 7 percent of the country's overall crude output. Another supply disruption has driven bullish sentiment in the market as traders weigh the possibility of longer-term output cuts from environmental damage. There was further good news for oil prices as the U.S. dollar weakened even more. When the dollar falls, oil prices often rise because dollar-priced commodities become cheaper for holders of other currencies. Investors are also closely watching for a possible drop in U.S. crude stockpiles, which could increase concerns about supply. Crude was already up almost 3% last week after OPEC+ made its announcement. This rise followed weeks of price declines caused by mixed demand signals and economic uncertainty. Now, with OPEC+ firm on its production schedule and several disruptions tightening supply, the market appears to be stabilizing. Further developments in Ukraine, the situation with Iran, and weather conditions in North America are likely to play a key role in shaping the oil market over the next few days.
Yahoo
3 days ago
- Business
- Yahoo
Crude Below $65 Squeezes U.S. Shale, Even as Drivers Celebrate
In a market increasingly governed by geopolitical tremors and macroeconomic mismatches, crude oil dipping below $65 per barrel seems like a gift to global consumers. But behind that price tag lies a slow-moving crisis for U.S. shale producers, many of whom are being forced to pull back on production, delay capital projects, and recalculate what sustainability means in a low-margin world. Even after a brilliant spike on Monday, Brent is still languishing around $65 per barrel, with WTI trailing slightly lower. But while American drivers are beginning to enjoy sub-$3 gasoline at the pump in several states, producers from the Permian to the Bakken are facing rising pressure from investors and markets alike. Low prices are forcing tough decisions on everything from rig count to buybacks, and the broader U.S. energy sector is again confronting volatility. OPEC+'s weekend announcement that it will continue easing output restrictions with a fresh 411,000 bpd increase for July barely registered in the market, distracted as it was by Ukrainian drones and Russian military targets. But in the interim, American producers are stuck in a precarious position, squeezed between falling benchmarks and rising breakevens. A year ago, $65 oil would not have raised alarms. In fact, many U.S. producers and analysts viewed that price level as sustainable — if not ideal. Coming off the post-pandemic cost discipline and a period of investor-enforced capital restraint, shale operators had slimmed down enough to turn profits in the $60–$70 range. But the landscape in 2025 looks very different. Input costs for steel, labor, and frac materials have surged, pushing breakeven prices in major basins closer to $70. The average breakeven price for Permian producers is now edging back toward the mid-$60s, up from the mid-$50s just two years ago. New tariffs on imported equipment have further inflated expenses, as noted by the Financial energy analysts have been sounding the alarm that these prices are not sustainable for U.S. shale. Rystad Energy said in a May 30 briefing that the breakeven price for new horizontal wells in key shale plays is now closer to $68 per barrel, a sharp rise compared to 2023. 'There's an expectation of tight capital budgets and slower reinvestment — even if prices recover modestly,' said analyst Artem Abramov. Wood Mackenzie echoed the sentiment, noting that investor expectations for returns have hardened. 'This is not 2014. Investors want cash flow, not growth,' said Robert Clarke, VP of upstream research. 'If the price floor doesn't come back, the rig count absolutely will fall.' While investors continue to prioritize shareholder returns over growth, producers now face the challenge of delivering those returns with increasingly thin margins. What was a comfortable floor in 2024 has become a pressure point in 2025. Diamondback Energy, one of the top-tier Permian operators, recently flagged that U.S. shale output may have already peaked for 2025. Speaking during its May earnings call, CEO Travis Stice said, 'We're entering a period of discipline, not expansion. Prices like this don't support aggressive growth.' The company has reduced its production guidance slightly for the second half of the year and halted plans to add rigs. Share buybacks were modest in Q1 (just $150 million) and no new acceleration has been signaled. Diamondback is still profitable, but just barely, and analysts at Truist Securities have warned that 'continued sub-$65 oil could force a dividend reduction later in the year.' Liberty Energy, a major hydraulic fracturing services provider, is in deeper water. With fewer producers willing to fund new wells, the company has warned it may reduce its frac crew count by up to 15% by August. According to CEO Chris Wright, 'The environment is telling us to get lean again.' The stock has lost over 40% since January, despite earlier optimism about a robust drilling year. Liberty's challenges are particularly telling because the company operates across multiple basins and serves both large and mid-sized independents. As goes Liberty, so goes the rig count. Coterra Energy has begun trimming its exposure more aggressively. In its latest investor presentation, the company noted a planned reduction in Permian rig activity by 30% for H2 2025. Capital expenditures are being revised downward by 4%, and executives say they're 'focused on preserving shareholder returns in a tough environment.' Coterra's diversified asset base — spread across the Permian, Marcellus, and Anadarko basins — gives it a buffer. But as the New York Times recently reported, 'The economic playbook of pumping through the pain is losing favor fast' among shale CFOs. One less-discussed factor contributing to the squeeze: steel tariffs. reported last week that U.S. imports of OCTG (oil country tubular goods) have dropped sharply due to new rounds of tariffs on Chinese and Vietnamese pipe. As a result, costs for casing and tubing have risen over 20% YTD for many mid-cap producers. This further erodes margins at a time when shale players have little room for inefficiencies. Even firms with hedges in place for H1 2025 will see rolling exposure in Q3 and Q4. The pain is only just beginning. The bigger picture is industry retrenchment. While the U.S. consumer cheers falling gas prices, the supply chain that keeps those prices low is looking brittle. The rig count, already down 7% since January, is expected to fall further in June. If prices remain at or below $65, shale may contract by another 300,000 to 500,000 bpd by year-end, according to estimates from S&P Global. Unless there's a sudden reversal in global balances or a geopolitical shock that drives prices higher, U.S. shale producers may need to brace for a longer downturn than anyone expected. More Top Reads From this article on 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
Kuwait Times
3 days ago
- Business
- Kuwait Times
Trade war and rising oil supplies weigh on crude prices
KUWAIT: Worries over the health of the global economy amid escalating trade protectionism together with an accelerated unwind of OPEC+ output cuts pushed Brent crude to a four-year low of $60/bbl in early May – though prices have risen off their lows. Responding to the weaker economic outlook, the IEA downgraded its 2025 oil demand growth projections to a multi-year low of 740 kb/d, which, in the context of faster OPEC+ supply increases and rising non-OPEC flows, risks a supply glut over the medium term. This is the central downside risk to oil prices, signaled by weaker oil futures and a spate of downward price revisions by forecasting agencies. Providing some upside potential is the prospect of supply disruptions from more stringent US sanctions on Iran and Venezuela or a de-escalation in the global trade tariff conflict. Largely unchanged in Q1,benchmark oil prices have dropped precipitously so far in Q2, after President Trump's 'Liberation Day' tariff deluge on US trading partners and OPEC+'s decision to accelerate the pace of its supply cut unwinding schedule. Brent fell to four-year lows in April, shedding 15 percent by the close of the month, the steepest monthly decline since November 2021, and then dropped further to $60.2 earlier in May. The marker has since struggled to break out of the low-to-mid-60s range, though President Trump's decision to slash tariffs on Chinese goods for 90-days did lift prices marginally. Prices are now ranging around $64/bbl, caught between bearish sentiment linked to unexpected crude inventory builds in the US and a third consecutive month of schedule-busting OPEC+ supply hikes on the one hand, and falling US oil rig counts and pessimism surrounding the prospects for a new Iran nuclear deal that would satisfy both the US and Iran on the other. President Trump's 'maximum pressure' strategy vis-à-vis Iran and threat to impose even more stringent sanctions on the country's energy exports has been one of the few bullish impulses for oil prices and could puncture the negative sentiment that has befallen the oil market in 2025. The pessimism has also been evident in the formation of a curious anomaly in Brent's forward curve: while the front end of the curve has been 'backwardated'(near-term prices higher than prices in the future), later month prices have shifted into a contango structure that see prices rising over earlier months. This so-called 'smiley' structure is fairly unprecedented and appears to signal that markets believe summer oil demand will be healthy enough to keep prices firm in the short term but insufficient to prevent a surplus and stock builds later on. And this is due to the potent combination of trade-tariff linked macroeconomic weakness and accelerating OPEC+ supply especially. Meanwhile, the bullish speculator positions that had built up in Q1 quickly reversed in Q2 amid the spike in risk and uncertainty that followed April's tariff onslaught and OPEC+'s accelerated resupply timetable. 'Net length', the difference between the number of 'long' (betting on prices rising) and 'short' contracts (positions staked on prices falling) declined by 155,838 lots w/w in the week-ending 4 April, the sharpest drop in the available data. Net length has recovered slightly more recently as hedge funds view some upside risk in US-Iran nuclear talks failing to progress. Growth at slowest Near-term oil demand growth was revised sharply lower following the escalation of the trade war between the US and China. The International Energy Agency (IEA), taking its cue from the earlier downgrade by the IMF to global GDP growth in 2025 (and beyond), has lowered its forecast for oil demand growth this year to 740 kb/d and 760 kb/d in 2026. This is the weakest rate of growth since pandemic-affected 2020. The IEA pegs total oil demand at 105 mb/d in 2025. OPEC lowered its demand growth forecast by a less severe 150 kb/d to 1.3 mb/d for both years. OPEC cites higher petrochemical production, solid road and air mobility as well as robust industrial activity in support of its more bullish oil demand growth projection compared to peers. This would also not be incongruous with its recent policy of fast-tracking the unwinding of members' voluntary supply cuts. Despite broad demand-side worries, OPEC+ surprised the markets by accelerating the pace of unwind of 2.2 mb/d in voluntary output cuts by the 'OPEC-8' (which includes Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) from 131 kb/d per month from April to 411kb/d in May and then again for both June and July. The move was ostensibly framed as a bid to 'punish' serial quota violators, such as Kazakhstan and Iraq, for failing to cut production in line with their quota obligations and compensatory cut promises. The Saudis hoped the fiscal discomfort of freefalling oil prices would bring about the discipline that has so far been absent among these overproducing members. Part of the deal was that overproducing members would in good faith compensate for their non-compliance by cutting production according to a mutually agreed timetable thereby offsetting some of the supply that was about to be released. According to OPEC secondary sources, the average aggregate volume of OPEC-8 compensatory cuts required as 'payback' for members' overproduction from January 2024 to March 2025 is 305 kb/d, which would have easily offset the 131 kb/d of monthly incremental production OPEC-8 had originally planned. This would have resulted in a de-facto output cut. That said, in April, the first month in the schedule that called for higher OPEC-8 supply, monthly supply gains from the group, at 23 kb/d, fell far short of the 131 kb/d that had been planned. Only four of the eight producers – Saudi, the UAE, Oman and Russia – increased production. Despite lowering output in April, Kazakhstan and Iraq were once again producing well above their respective quotas never mind honoring compensatory cut pledges. Declaration of Cooperation(DOC) production (excluding quota-exempt Iran, Libya, Venezuela and Mexico) fell slightly in April to 30.0 mb/d (-17 kb/d). In the US, crude production hovered near record levels of 13.4 mb/d by mid-May, as per Energy Information Administration (EIA) data. (Chart 6).Following the plunge in oil prices and the downturn in global macroeconomic prospects, the EIA lowered its forecast for US crude oil output growth this year by nearly half to 208kb/d, the slowest rate of expansion since 2021. For 2026, growth is expected to decelerate even further to just 82kb/d as producers pull back on activity amid lower oil prices. According to a Dallas Fed energy survey, the average breakeven price in the shale patch to drill a new oil well is around $65/bbl, several dollars above the current price of West Texas Intermediate. US shale firms have also been grappling with the challenges of rising gas-to-oil and water-to-oil ratios, which are straining infrastructure and raising operational costs. The EIA is projecting US crude oil production to peak in 2027at 14 mb/d, with shale oil production topping out at 10 mb/d before declining through to 2050. The recent decline in oil prices is also weighing on broader non-DoC production, prompting downgrades to the outlook, though at an estimated 1.3 mb/d this year according to the IEA, supply growth is still well outpacing demand growth. This is being driven by higher production in Brazil, Guyana, and Canada as well as in the US. For 2026, however, the IEA sees non-DoC supply growth lagging demand growth, at 820 kb/d. Market balance Weaker oil demand prospects due to trade tariff-linked global macroeconomic headwinds and rising supply both from OPEC+ and non-OPEC+ producers, are weighing heavily on market sentiment and by extension oil prices. The fundamentals are signaling a loosening oil market that will shift from a slight supply deficit last year to a pronounced surplus in 2025. The IEA estimates the 'call' on OPEC+ (the volume of OPEC+ crude needed to balance the market after accounting for demand and non-OPEC supply) to be in the region of 41.2 mb/d on average in 2025. OPEC+ was already pumping significantly above the IEA's estimate for the call in Q1 2025 (+800 kb/d) before the group decided to ramp up output in April. And the increase in OECD commercial crude stocks in March was beginning to reflect that. With OPEC-8seemingly pressing ahead with a more rapid resupply pace, that buffer will quickly erode. Assuming no change to current OPEC-8 policy and no offsetting compensatory cuts, the entirety of 2023-2024's 2.2 mb/d of supply cuts would have been unwound by October 2025 (rather than the original late 2026), pushing the market into firm surplus territory, averaging 1.4 mb/d, according to our calculations. Risks to our standing oil price forecast of $70/bbl (2025 and 2026) are increasingly concentrated to the downside, barring significant supply-side geopolitical disruptions such as tighter Iran sanctions or, on the demand side, an upturn in global economic prospects, perhaps by a rolling back of trade tariffs.
Qatar Tribune
3 days ago
- Business
- Qatar Tribune
Oil market braces for glut amid weak demand and rising supply
Agencies Worries over the health of the global economy amid escalating trade protectionism together with an accelerated unwind of OPEC+ output cuts pushed Brent crude to a four-year low of $60/bbl in early May – though prices have risen off their lows. Responding to the weaker economic outlook, the IEA downgraded its 2025 oil demand growth projections to a multi-year low of 740 kb/d, which, in the context of faster OPEC+ supply increases and rising non-OPEC flows, risks a supply glut over the medium term. This is the central downside risk to oil prices, signaled by weaker oil futures and a spate of downward price revisions by forecasting agencies. Providing some upside potential is the prospect of supply disruptions from more stringent US sanctions on Iran and Venezuela or a de-escalation in the global trade tariff conflict. Largely unchanged in Q1,benchmark oil prices have dropped precipitously so far in Q2, after President Trump's 'Liberation Day' tariff deluge on US trading partners and OPEC+'s decision to accelerate the pace of its supply cut unwinding schedule. Brent fell to four-year lows in April, shedding 15 percent by the close of the month, the steepest monthly decline since November 2021, and then dropped further to $60.2 earlier in May. The marker has since struggled to break out of the low-to-mid-60s range, though President Trump's decision to slash tariffs on Chinese goods for 90-days did lift prices marginally. Prices are now ranging around $64/bbl, caught between bearish sentiment linked to unexpected crude inventory builds in the US and a third consecutive month of schedule-busting OPEC+ supply hikes on the one hand, and falling US oil rig counts and pessimism surrounding the prospects for a new Iran nuclear deal that would satisfy both the US and Iran on the other. President Trump's 'maximum pressure' strategy vis-à-vis Iran and threat to impose even more stringent sanctions on the country's energy exports has been one of the few bullish impulses for oil prices and could puncture the negative sentiment that has befallen the oil market in 2025. The pessimism has also been evident in the formation of a curious anomaly in Brent's forward curve: while the front end of the curve has been 'backwardated'(near-term prices higher than prices in the future), later month prices have shifted into a contango structure that see prices rising over earlier months. This so-called 'smiley' structure is fairly unprecedented and appears to signal that markets believe summer oil demand will be healthy enough to keep prices firm in the short term but insufficient to prevent a surplus and stock builds later on. And this is due to the potent combination of trade-tariff linked macroeconomic weakness and accelerating OPEC+ supply especially. Meanwhile, the bullish speculator positions that had built up in Q1 quickly reversed in Q2 amid the spike in risk and uncertainty that followed April's tariff onslaught and OPEC+'s accelerated resupply timetable. 'Net length', the difference between the number of 'long' (betting on prices rising) and 'short' contracts (positions staked on prices falling) declined by 155,838 lots w/w in the week-ending 4 April, the sharpest drop in the available data. Net length has recovered slightly more recently as hedge funds view some upside risk in US-Iran nuclear talks failing to progress. Near-term oil demand growth was revised sharply lower following the escalation of the trade war between the US and China. The International Energy Agency (IEA), taking its cue from the earlier downgrade by the IMF to global GDP growth in 2025 (and beyond), has lowered its forecast for oil demand growth this year to 740 kb/d and 760 kb/d in 2026. This is the weakest rate of growth since pandemic-affected 2020. The IEA pegs total oil demand at 105 mb/d in 2025. OPEC lowered its demand growth forecast by a less severe 150 kb/d to 1.3 mb/d for both years. OPEC cites higher petrochemical production, solid road and air mobility as well as robust industrial activity in support of its more bullish oil demand growth projection compared to peers. This would also not be incongruous with its recent policy of fast-tracking the unwinding of members' voluntary supply cuts. Despite broad demand-side worries, OPEC+ surprised the markets by accelerating the pace of unwind of 2.2 mb/d in voluntary output cuts by the 'OPEC-8' (which includes Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) from 131 kb/d per month from April to 411kb/d in May and then again for both June and July. The move was ostensibly framed as a bid to 'punish' serial quota violators, such as Kazakhstan and Iraq, for failing to cut production in line with their quota obligations and compensatory cut promises. The Saudis hoped the fiscal discomfort of freefalling oil prices would bring about the discipline that has so far been absent among these overproducing members. Part of the deal was that overproducing members would in good faith compensate for their non-compliance by cutting production according to a mutually agreed timetable thereby offsetting some of the supply that was about to be released. According to OPEC secondary sources, the average aggregate volume of OPEC-8 compensatory cuts required as 'payback' for members' overproduction from January 2024 to March 2025 is 305 kb/d, which would have easily offset the 131 kb/d of monthly incremental production OPEC-8 had originally planned. This would have resulted in a de-facto output cut. That said, in April, the first month in the schedule that called for higher OPEC-8 supply, monthly supply gains from the group, at 23 kb/d, fell far short of the 131 kb/d that had been planned. Only four of the eight producers – Saudi, the UAE, Oman and Russia – increased production. Despite lowering output in April, Kazakhstan and Iraq were once again producing well above their respective quotas never mind honoring compensatory cut pledges. Declaration of Cooperation(DOC) production (excluding quota-exempt Iran, Libya, Venezuela and Mexico) fell slightly in April to 30.0 mb/d (-17 kb/d). In the US, crude production hovered near record levels of 13.4 mb/d by mid-May, as per Energy Information Administration (EIA) data. (Chart 6).Following the plunge in oil prices and the downturn in global macroeconomic prospects, the EIA lowered its forecast for US crude oil output growth this year by nearly half to 208kb/d, the slowest rate of expansion since 2021.
Time of India
4 days ago
- Business
- Time of India
Wall Street opens slightly lower driven by market anxiety over crude oil prices, tariffs and Russia-Ukraine conflict
AI-generated image Stock markets in the United States opened with a slight decline, surrendering a portion of their gains from May, which marked their strongest performance since 2023. During early Monday trading, the S&P 500 declined by 0.3%. The Dow Jones Industrial Average dropped 174 points, representing a 0.4% decrease, whilst the Nasdaq composite fell by 0.2%. This was driven by crude oil prices that surged more than 4%. Despite OPEC+ nations agreeing to boost their output further, market analysts noted this decision was largely anticipated by investors. Additionally, Ukrainian strikes within Russian territory over the weekend heightened concerns regarding global oil and gas distribution. Global trade tensions also contributed to the decline as Beijing dismissed US claims regarding breach of tariff reduction agreements. Simultaneously, tensions with the European Union escalated following Trump's proposal to increase steel duties twofold. This was in line with the expectation of Wall Street opening on Monday. The intensifying Russia-Ukraine situation over the weekend heightened market concerns and drove oil prices upward. Prior to Monday's opening bell, S&P 500 futures declined 0.4%, whilst Dow Jones Industrial Average futures decreased 0.3%. The Nasdaq futures showed a reduction of 0.6%. The escalating Russia-Ukraine conflict, coupled with OPEC+'s decision to implement a smaller-than-anticipated production increase, led to rising oil prices and gains in oil company shares. Devon Energy experienced a 2.5% increase, whilst Chevron, Exxon and ConocoPhillips each gained between 1% and 1.5%. The US benchmark crude oil rose by $2.54, exceeding 4%, reaching $63.33 per barrel. Simultaneously, Brent crude, the global benchmark, increased by $2.34 to $65.12 per barrel. Steel sector shares witnessed substantial gains after President Donald Trump announced to Pennsylvania steelworkers on Friday his decision to increase steel import tariffs to 50%, doubling the previous rate to safeguard their industry. This significant increase could potentially raise prices for steel, a crucial material in housing, automotive and various other manufactured goods. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
