The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, decided on December 5 to delay its planned output increase by three months to April 2025, and to gradually increase production until the end of 2026 as OPEC+ (especially Saudi Arabia and the United Arab Emirates), want to prevent an oil price slide from current levels.
“They have an ambition to try and get Brent closer to the $100 per barrel level or, at least back to the low $90s per barrel seen in April this year and September last year,” Chris Weafer, CEO of Macro-Advisory, the leading independent strategic business consultancy in the Eurasia region, told NE Global on December 11, adding that if they increased supply too soon the price would go lower making their $100 target much harder or slower to achieve.
OPEC+ has set an average price of $100 per barrel for Brent for the next ten years as they accept that the era when OPEC can dictate the oil price will be over by the middle of the next decade, demand for oil will steadily decline over the next 20 twenty years and they wish to maximize export earnings between now and 2035 to fund plans to create new and future post-oil economic drivers, Weafer said. “It means they will continue to take short-term actions, such as restricting supply, to ensure the oil price stays at least at acceptable levels until the supply-demand equation shifts to push the price higher,” he explained.
Manouchehr Takin, an independent oil & energy consultant with fifty years of experience, told NE Global on December 10 that OPEC’s decision will have a positive impact on the price of oil. “This is because the supply of oil will be less than had been previously assumed. Oil price is always influenced by anticipations and expectations, as well as the actual physical supply and demand. Until recently, the general expectation was for an increase in planned output beginning in December. Now we know this will be delayed to April and possibly the end of the year,” Takin said.
The 38th OPEC and non-OPEC Ministerial Meeting (ONOMM) was held today, via videoconference, under the Chairmanship of HRH Prince Abdulaziz bin Salman Al-Saud, Minister of Energy of the Kingdom of Saudi Arabia and ONOMM Chairman.
The countries participating in the Declaration of… pic.twitter.com/y1WidzayD1
— OPEC (@OPECSecretariat) December 5, 2024
Francesco Sassi, research fellow in energy geopolitics and markets at R.I.E.-Ricerche Industriali ed Energetiche in Bologna, Italy, told NE Global on December 10 delays announced by OPEC+ are the only rational choice in a global oil market battered by economic unease in China and Europe, growing non-OPEC+ supplies, and the fast deployment of EV vehicles, especially in China. “The only other option would be to start an oil price war with the U.S. and other non-OPEC+ producers, with deep geopolitical implications. This would also be largely unaffordable for many OPEC+ producers and likely to increase further the instability in markets,” Sassi argued.
The fall of the Assad regime’s impact on the oil market
The fall of the regime change in Syria will have very little impact on world oil markets, Weafer said. “The country produced 96,000 barrels per day last year and consumed approximately 140,000 barrels. Syria has modest oil reserves and there are no major oil pipelines crossing its territory so neighboring oil exports, for example from Iraq, should also be unaffected.”
Takin said he also did not believe that the fall of the Assad regime will have a serious impact on the oil market. “The volume of Syria’s oil is not that significant. Speculations on its oil price impact would depend on one’s view about politics. Some say that the fall of Assad could encourage Israel to attack Iran’s oil installations, but I am not sure,” Takin opined.
“I would not say that the fall per se has implications on global oil geopolitics,” Sassi agreed. “At least, so far it didn’t have such a global energy balance. However, the destabilization of Syria and a possible scenario where (Hayat Tahrir al-Sham) HTS-led regime resume fighting with Kurdish U.S.-backed forces in the Northeast or Israel steps up military operations in the Golan Heights in Syria’s south could severely destabilize the Middle East and thus affect oil markets,” the Italian energy geopolitics analyst argued.
Trump policies and oil prices
Asked if U.S.-President elect Donald Trump were to tighten sanctions on Iran upon taking office and if this could this affect Iranian oil production and prices, Weafer noted the oil price in 2025 will again be determined by two basic factors: supply and demand. “The supply side will be determined by OPEC+ supply constraint – as they are promising – and whether Israel, with U.S. support, will target Iran’s oil exports or whether tighter U.S. sanctions enforcement will dissuade China from buying Iranian oil,” he said.
Takin, who has worked in exploration/production operations and management with national and international oil and mining companies and the Geological Survey of Iran, said Trump’s possible tightening of sanctions on Iran might limit the country’s oil exports, for example pressuring China and India not to purchase oil from Iran. Iran would then produce less from its oil fields, he said.
According to Weafer, it is estimated that Iran currently exports approximately 1.6 million barrels per day and it goes primarily to China. “If that oil is blocked, via an infrastructure attack by Israel or by U.S. sanctions enforcement, then China will have to look elsewhere for oil and that will push the price of crude back to the low $90s seen earlier this year,” he said.
Currently there are no more obvious or known supply side risks. “The demand side is mostly about Chinese and Indian demand. There is no reason to assume that demand from either will grow materially while, equally, there are no reasons to assume a demand slide. The demand side of the equation looks stable and is expected to remain so until China’s economy picks up again. That is not expected in 2025,” Weafer said.
In 2024, Russia has frequently exceeded its production limits set by OPEC+. But Russia will not raise oil exports in 2025, Weafer predicted. “It is struggling with oilfield maintenance, in the older fields, due to sanctions blocking spare parts, and Rosneft recently announced a delay in the start of the 2-million-barrel per day Vostok oil field until 2026. But all indicators are that Russia should be able to maintain current production and exports reduced to comply with the OPEC+ agreement through 2025. The U.S. is threatening tighter enforcement sanctions to try and reduce Russian oil exports but they, and the EU, have tried several times with different mechanisms to achieve this and none have worked, at least thus far,” Weafer explained.
