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OPEC+ Facing Challenges: Between Trump’s Pressure and Sanctions on Russia

OPEC+ Facing Challenges: Between Trump’s Pressure and Sanctions on Russia

Amid global political and economic tensions, investors are closely watching the OPEC+ meeting,
which may determine the trajectory of oil prices in the coming months.

 

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Global Anticipation

Decisions Amid Calls for Lower Prices and Tightened Sanctions on Moscow
The global oil markets are closely monitoring the upcoming OPEC+ meeting on Monday,
as rapid developments unfold, including increasing U.S. pressure, the repercussions of recent sanctions on Russia,
and concerns about supply stability.

The meeting comes as U.S. President Donald Trump urges the organization to lower oil prices,
arguing that this could pressure Russia into ending the war in Ukraine by reducing its oil revenues.
However, Russia remains a key player within the alliance.

 

 

Trump’s Influence

Will OPEC+ Change Its Policy?
 Despite Trump’s demands, an OPEC delegate told “Asharq” that the alliance’s decisions are based on market considerations
rather than political statements.
The delegate added that Trump’s remarks are not new, as he had previously called for increased production
and lower prices during his first term, which did not alter OPEC+ policies.

Experts suggest that a significant production increase could weaken Trump’s slogan “Drill,
baby, drill,” as it might undermine the ability of U.S. oil producers to boost their production.
At the same time, some analysts believe that sanctions on Iran, Venezuela, and Russia,
along with tariffs against Canada and Mexico, may limit market supplies.

 

 

Diplomatic Moves

As part of preparations for the meeting, Saudi Energy Minister Prince Abdulaziz bin Salman held discussions with officials from Iraq and Libya, focusing on energy cooperation and market stability.
While no specific details were disclosed about the upcoming meeting, these discussions highlight the alliance’s efforts to ensure market stability amid current challenges.

For more than two years, OPEC+ has been curbing supplies to support prices, with production resumption repeatedly delayed.
The group is expected to gradually increase production from April, with monthly increments of 120,000 barrels per day.

 

 

Sanctions on Russia

A New Test for the Alliance’s Unity The latest U.S. sanctions pose a new challenge to Russian oil supplies, prompting many Asian customers to seek alternatives from the Middle East. However, an OPEC delegate noted that Russia consistently finds ways to bypass sanctions and maintain its exports.

According to Goldman Sachs, the extensive U.S. sanctions on Russia’s oil sector will not lead to a “significant decline” in production,
as high shipping costs and lower Russian crude prices continue to support trade flows.
Meanwhile, analysts believe that OPEC+ will not rush to adjust its production policy in direct response to sanctions or U.S. pressure
but will instead monitor developments before making substantial decisions.

 

 

 

 

 

 

 

OPEC+ Facing Challenges: Between Trump’s Pressure and Sanctions on Russia

 

Meeting Scenarios

Will the Alliance Maintain Its Production Policy?

A source familiar with energy matters in an OPEC country stated that the most likely scenario (80% probability) is to maintain the current production policy until the end of the first half of the year.
The source warned that a sudden production increase could cause oil prices to collapse,
an outcome that producing nations would find unacceptable.

Market observers expect that OPEC+ will continue restricting supplies in the first quarter before gradually easing restrictions from April onward.
A Bloomberg survey of 15 analysts and traders indicated that the alliance aims to prevent excessive price declines to sustain investment in the oil sector.

 

 

Post-March Prospects

Will OPEC+ Increase Production? James Swanston, a financial analyst at Capital Economics,
believes that the alliance may use the post-March period as an opportunity to advance its long-term goals,
such as regaining market share through gradual production increases.

He added that Gulf countries, particularly Saudi Arabia,
could increase production to 12 million barrels per day while ensuring that prices remain above $60 per barrel,
which would support economic growth in the region.

 

 

Key Milestones in OPEC+ Production Cuts

  • The alliance began cutting production in November 2022 due to weak demand, particularly in China after the COVID-19 pandemic.
  • In July 2023, eight alliance members committed to voluntary production cuts, with Saudi Arabia shouldering the largest reduction of 1 million barrels per day, while Russia reduced its output by approximately 400,000 barrels per day.
  • The current total production cuts by OPEC+ amount to about 5.9 million barrels per day.
  • The initial reduction of 3.66 million barrels per day has been extended until 2026.
  • The upcoming meeting will discuss whether to revoke or maintain the voluntary reduction of 2.2 million barrels per day.

 

Conclusion

As markets eagerly await the OPEC+ meeting, the alliance’s decisions remain dependent on global developments,
particularly the increasing sanctions on Russia and political pressure from the U.S. Balancing market stability with the interests of oil-producing countries will keep the alliance’s decisions under close scrutiny in the coming months.

 

 

 

OPEC+ Facing Challenges: Between Trump’s Pressure and Sanctions on Russia

EIA Forecasts: Non-OPEC Oil Production to Drive Growth

EIA Forecasts: Non-OPEC Oil Production to Drive Growth in 2025

The U.S. Energy Information Administration (EIA) has projected that non-OPEC countries
will be the primary drivers of oil production growth in 2025,
due to production restrictions imposed by the OPEC+ alliance.

 

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Oil

 

 


Oil

According to the Short-Term Energy Outlook report,
the average price of Brent crude oil is expected to reach $73.58 per barrel in 2025,
marking a 3.3% decline from previous estimates.
Meanwhile, U.S. crude oil is forecasted to close next year at $69.12 per barrel,
a 3.5% reduction from earlier predictions.

 

On the global production front, the EIA revised its forecasts downward by 0.4% to 104.2 million barrels per day for 2025.
This includes a 1% cut in OPEC+ production estimates to 42.8 million barrels per day and a slight 0.1% reduction
in U.S. oil output projections, bringing it to 13.52 million barrels per day.

 

The EIA noted that increased U.S. crude oil production would significantly reduce net oil imports into the U.S. by more than 20%,
bringing them down to 1.9 million barrels per day—the lowest annual level since 1971.

 

In terms of demand, the December report highlighted a slight downward adjustment in global oil consumption forecasts,
now expected to reach 104.3 million barrels per day in 2025,
compared to earlier estimates of 104.4 million barrels per day.

 

 

EIA Forecasts: Non-OPEC Oil Production to Drive Growth in 2025

OPEC+’s Options for Managing the Expected Oil Surplus in 2025

OPEC+’s Options for Managing the Expected Oil Surplus in 2025?: The OPEC+ alliance prevented an oil surplus this year by delaying plans to restore production.
This helped stabilize prices that had declined due to slowing economic growth in China and increased U.S. supplies.
However, forecasts indicate oil markets could face a surplus in 2025 despite OPEC+ cutting production.
This anticipated surplus is attributed to increased output from non-member countries like the United States, Guyana, Brazil, and Canada,
along with weak global demand growth due to the shift towards electric vehicles and China’s slowing economy.

 

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The International Energy Agency expects global oil consumption to grow by less than 1% next year
amid weak post-pandemic economic recovery momentum and accelerated shifts towards alternative energy sources.
Meanwhile, global production outside of OPEC+ is expected to outpace this modest consumption growth,
with the United States contributing a significant share of this additional output.
As a result, the agency forecasts an increase in global oil inventories, particularly in the first quarter of 2025.

Despite these expectations, OPEC+ faces challenges adapting its strategy to the new variables.
Delaying plans to restore production could postpone the expected surplus, but pressures from member countries,
such as the UAE, which seeks to increase its output, may hinder these plans.
Saudi Arabia, which relies on high oil prices to finance its economic projects,
faces financial challenges if prices continue to fall.

According to forecasts by Citi Group and JPMorgan,
central banks and consumers might find some relief in the expected price drop to $60 per barrel.
However, this scenario puts pressure on producing countries.
Some analysts believe that OPEC+ may ultimately decide to take more drastic measures,
such as increasing production to counter competitors like U.S. shale oil producers.
However, this is not currently the most likely scenario.

The alliance may continue to delay restoring production to avoid the expected surplus in 2025.
Still, maintaining this policy depends on member states’ internal challenges and external pressures from global markets.

 

Source: Bloomberg

 

OPEC+’s Options for Managing the Expected Oil Surplus in 2025

 

Asian Stocks Drop as China’s Economic Support Shows No Results

Asian Stocks Drop as China’s Economic Support Shows No Results: Asian stocks fell after four months of gains, as China’s efforts to support its economy showed no tangible results.

 

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Oil Prices

Asian Stocks

Purchasing Managers’ Index

 

 

 

Oil Prices Continue to Decline Amid Signs of Increased OPEC+ Production and China’s Struggles

Oil prices fell amid signs that the OPEC+ alliance will move forward with a plan to raise production starting
in October while economic headwinds in China continue to grow.
Brent crude futures for November delivery dropped to around $76 a barrel after losing more than 2% on Friday,
and West Texas Intermediate traded near $73.
According to delegates involved in the discussions, the OPEC+ alliance
is set to add 180,000 barrels daily as it gradually restores halted production since 2022. 

Over the weekend, Chinese data showed factory activity contracted for the fourth month in August.
The housing sector’s recession deepened,
raising concerns that the world’s largest crude oil importer might struggle to meet its economic growth target this year.

 

Asian Stocks Drop as China’s Economic Support Shows No Results

Asian stocks fell after four months of gains, as China’s efforts to support its economy showed no tangible results.
Indices fell in Australia and China, while the South Korean index remained unchanged.
Japanese stocks were the only ones to rise on Monday,
supported by news of corporate earnings that exceeded expectations.
In Hong Kong, the main index declined,

with shares of New World Development falling 12%
after the debt-laden real estate developer said it expects to post its first annual loss in two decades.

U.S. futures also edged slightly lower, suggesting that the S&P 500 is poised to decline after closing higher on Friday,
supported by data that bolstered the Federal Reserve’s expectations of imminent rate cuts.
The dollar remained stable,
and global cash Treasury markets closed Monday due to the U.S. Labor Day holiday.
Australian government bond yields rose.

 

 

 

China’s Caixin Manufacturing PMI Better Than Expected

Data released by S&P Global on Monday morning showed

China’s Caixin Manufacturing PMI grew at a pace that exceeded market expectations in August.
According to the data, the Caixin Manufacturing PMI recorded 50.4 points in August,
significantly better than the forecasted 50.0 points.
The Caixin Manufacturing PMI in the People’s Republic of China had recorded 49.2 points in July.

 

Asian Stocks Drop as China’s Economic Support Shows No Results

Continued Decline in Oil Prices

Continued Decline in Oil Prices: On Wednesday, oil prices moved to their lowest levels in four months today,
As markets absorbed the OPEC+ decision to increase supplies later this year, U.S. crude and fuel inventories increased.

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This decline came following news from OPEC and its allies about plans
to increase supplies from October despite recent signs of weak demand growth.
In the United States, crude oil and gasoline inventories rose last week,
according to figures from the American Petroleum Institute.

According to the New York Mercantile Exchange, crude oil futures for July traded at $73.25 per barrel.
The dollar index contracts, which measure the performance
of the U.S. dollar against a basket of other major currencies, rose by 0.08% to trade at 104.

At the same time, Brent oil prices for August rose by 0.03% to trade at $77.54 per barrel,
while the price difference between Brent oil and crude oil contracts is $4.29 per barrel.

Continued Decline in Oil Prices

OPEC+ may need to consider oil production capabilities next month

OPEC+ may need to consider oil production capabilities next month.

The UAE, Kazakhstan, and Iraq plan to increase their total capacity by more than
300,000 barrels per day by 2025.

 

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Supply Stability is a Challenge

 

 

 

 

 

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The key question to be posed at next month’s OPEC+ meeting is whether the alliance will continue to cut oil supplies in the second half of the year. However, it may also need to address the long-term issue of crude production capacities.

The Organization of Petroleum Exporting Countries and its allies are reviewing the amount of oil that members can pump. J.P. Morgan Chase & Co. believes that there are three main countries that deserve an upgrade in their supplies.

It was reported that the UAE, Kazakhstan, and Iraq intend to increase their total capacity by more than 300,000 barrels per day starting next year. Abu Dhabi has indicated a much larger increase, as the Abu Dhabi National Oil Company (ADNOC) announced this week an increase in its capacity by 200,000 barrels per day to 4.85 million barrels per day.

However, the planned expansions may pose risks to the cohesion of the alliance and to oil prices in general.

 

 

 

 

Supply Stability is a Challenge

Saudi Arabia, the leader of OPEC+, already has significant levels of surplus capacity,
and a slowdown in global oil demand growth is expected in 2025, according to Canive.
Achieving stability in global supplies, and thus supporting prices,
becomes an increasing challenge under these circumstances.

The report mentioned that “the main issue for OPEC lies in 2025,”
because even if the alliance maintains the supply restrictions as they are this year,
it “does not address the imbalances in 2025.”

It has proven to be a complex issue in the past for OPEC+ to accommodate the growth in member capacity. In 2021, the OPEC+ alliance nearly ended amid a dispute between the UAE and Saudi Arabia over Abu Dhabi’s expansion ambitions.
The issue came to the forefront again last year,
and eventually reaching a compromise led to Angola’s departure after decades of membership.”

 

 

Oil continues to fall despite geopolitical tensions

Oil continues to fall despite geopolitical tensions: Oil prices dropped after their first consecutive weekly decline this year,
as traders assessed potential next moves from Iran and Israel amid escalating tensions in the Middle East.

 

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The price of Brent crude fell to around $87 per barrel after losing 3.5% last week,
the largest decline since early February.
The United States imposed new sanctions on the Iranian oil sector
and approved new funding for Ukraine in its war against Russia.

Since the beginning of the year, oil has risen by about 13% due to geopolitical tensions and OPEC+ supply cuts,
which have reduced supplies in the market.
Investors will focus on a slew of US economic data this week, including the Federal Reserve’s preferred inflation gauge,
which will provide further clues on the course of monetary policy.

Since March 2021, fund managers have been the most optimistic about Brent crude,
buying oil contracts to benefit from any rise amid increasing geopolitical risks.
Other markets also indicate an upward trend, with call options—which profit when prices rise
—trading at a premium over put options.

Additionally, earnings from the world’s largest oil companies, including Total Energies, Exxon Mobil, and Chevron,
are due this week, along with Asian companies such as Reliance and Sinopec.

 

Oil continues to fall despite geopolitical tensions

Oil builds on a strong quarterly rise focusing on Chinese demand

Oil builds on a strong quarterly rise focusing on Chinese demand:
Oil prices stabilized after registering significant gains in the first quarter,
driven by hopes of a notable recovery in China and the associated increase in demand.
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Oil prices rose this year due to “OPEC+” cutting supplies to push prices up and offset
the increase in production from outside the group.
The alliance is expected to endorse its current production policy at its meeting held online on Wednesday.
Also contributing to price support were Ukrainian attacks
on Russian energy infrastructure and escalating tensions in the Middle East.

The price of Brent crude for June remained around $87 per barrel,
following a nearly 14% increase in the prices of the nearest-due
during the first three months of the year,
West Texas Intermediate crude exceeded $83.
March saw a recovery in the Chinese industrial sector, halting a five-month decline,
which increased optimism about improved consumption in the largest oil importer.

A note from Goldman Sachs stated that robust oil demand in Europe also helped boost prices,
noting weak US supply growth and the potential extension of “OPEC+.”
cuts until 2024 were also bullish factors.
Last month, the bank predicted that commodities would rise this year as central banks cut interest rates,
supporting industrial and consumer demand.

Trading volumes are expected to be low at the start of the week, as many economies,
including the United Kingdom, are on the Easter holiday.

Oil builds on a strong quarterly rise, focusing on Chinese demand.

Continued Rise in Gold Prices

Continued Rise in Gold Prices: Gold prices remained near a two-month high during Monday’s trading,
following the release of economic data related to the US economy last week.
This strengthens the likelihood of the Federal Reserve cutting interest rates in June.

 

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Continued Rise in Gold Prices

OPEC+ Decisions to Extend Production Cuts Lead Oil Higher

Yen Hovers Around 150.00 Levels Awaiting Bank of Japan Governor’s Speech

Continued Rise in Gold Prices

Gold prices remained near a two-month high during Monday’s trading,
following the release of economic data related to the US economy last week.
This strengthens the likelihood of the Federal Reserve cutting interest rates in June.
The main factors affecting gold prices are developments in interest rates.
Prices moved upwards on Friday due to a series of overall economic data released in the United States,
encouraging the Fed to cut interest rates sooner than expected.

Gold prices rose by about $50 during the past week,
as price pressures eased according to the preferred inflation index
of the Federal Reserve and the US consumer confidence index.

 

OPEC+ Decisions to Extend Production Cuts Lead Oil Higher:

Oil prices witnessed an increase on Monday following OPEC+ member country’s
agreement to extend voluntary production cuts by 2.2 million barrels per day
during the second quarter of the year. This decision is in line with market expectations.

Brent crude futures rose by 28 cents or 0.3% to $83.83 per barrel,
while West Texas Intermediate crude futures rose by 20 cents or 0.3% to $80.17 per barrel.

These production cuts are expected to provide support to the oil
market amidst global economic concerns and increased production outside the OPEC+ group.
Russia’s announcement of additional export and production cuts surprised some analysts.

Oil prices received support in 2024 from escalating geopolitical tensions,
with increased Houthi attacks on commercial vessels in the Red Sea.
However, concerns about economic growth continue to cast shadows over the market.

 

 

 

Yen Hovers Around 150.00 Levels Awaiting Bank of Japan Governor’s Speech

 

The Japanese yen declined in Asian markets on Monday against a basket of global currencies,
continuing its losses for the second consecutive day against the US dollar
and moving away from its highest level in two weeks, amidst ongoing correction and profit-taking.

The yen is trading around a crucial level of 150 yen to the dollar,
with markets awaiting an important speech by Bank of Japan Governor Kazuo Ouda
on inflation developments in the country and the future of negative interest rates.

The dollar rose against the yen by about 0.2% to 150.21 yen,
from the opening price at the start of the day at 149.96 yen, and recorded its lowest level at 149.84 yen.

The yen lost about 0.1% against the dollar at the end of trading on Friday,
amidst correction and profit-taking, after hitting its highest level in two weeks the previous day at 149.20 yen.

Last week, the Japanese yen rose by 0.3% against the US dollar,
marking its first weekly gain in the past five weeks,
and the largest weekly gain in 2024 since late December 2023.

This weekly increase is a result of strong statements by a member
of the Bank of Japan’s monetary policy committee,
in addition to the decline in the yield of US ten-year Treasury bonds.

 

Continued Rise in Gold Prices

The global oil demand

The global oil demand: Oil prices have clearly risen during recent trading sessions,
marking a monthly gain in January of 6.7% compared to December.
Here are the most significant events and factors that have impacted the markets.

 

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Forecasts by OPEC and the IEA for global demand

Saudi Aramco

Rise in US inventories

 

 

 

Forecasts by OPEC and the IEA for global demand

They still expect global demand to increase by 2.2 million barrels per day,
reaching a total expected demand of 104 million barrels in 2024.
This figure is considered a record, based on their expectations for global economic growth of 2.7%,
up from last month’s forecast of 2.6%.
Demand from China, the world’s second-largest oil importer,
is also expected to rise, despite economic challenges and no signs of recovery yet.
They also pointed out that the US economy is strong,
and demand will increase starting from the second quarter of the current year.

 

Saudi Aramco

The CEO of Saudi Aramco stated that the expected demand for the current year
could reach 1.5 million barrels per day. As for the IEA,
it expects demand to be at 1.2 million barrels per day,
seeing the first quarter of the current year as a period of weak demand
and expecting a rise in demand in the coming period.
On the other hand, attacks on Russian refineries, tensions in the Middle East,
and disruptions in navigation in the Red Sea have increased concerns
about the impact on supplies and supported the rise in oil prices.

 

 

Rise in US Inventories

However, the increase in floating crude oil inventories by +8.3% is considered a negative factor for oil prices,
as inventories accumulate and affect the balance between supply and demand.
Traders are awaiting the US inventory report today, which will impact oil markets,
after rising by more than 5 million barrels last week, but the markets did not pay much attention.
Oil markets are expected to see volatility in the coming period,

but in general, factors supporting a significant rise in oil prices are more pronounced.
Current oil prices: West Texas Intermediate (WTI) crude oil prices reached $77.90 per barrel,
while Brent crude oil prices rose to $82.85 per barrel.

 

The global oil demand