Trump factor disrupts Middle East; reportedly some OPEC+ countries are considering restarting increased production in April

Latest reports indicate that some representatives of OPEC+ member countries believe there is room to resume oil production increases in April. They also think that concerns over a global oil market oversupply have been exaggerated.

Some representatives from OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) have revealed that there is now space to restore the production increase plans that were paused during the weak seasonal demand in the first quarter of this year.

Last year, eight core OPEC+ members agreed to gradually increase oil output, but they paused the increase in January, February, and March of this year. Currently, about 1.2 million barrels per day of production has not yet been restored.

The representatives who shared this information emphasized that OPEC+ did not commit to any specific actions before the March 1 meeting, nor did they hold formal discussions. Another representative added that the final decision might depend on whether Trump takes military action against Iran or reaches a nuclear deal with them.

Overnight, Trump stated that the United States “must” reach an agreement with Iran, or the situation will be “very serious.” On Thursday (February 12), reports said that the U.S. military dispatched the USS Gerald R. Ford aircraft carrier to the Middle East.

Analysts believe that Trump’s tough stance on Venezuela and Iran, combined with supply disruptions from North America to Kazakhstan, helped oil prices perform strongly earlier this year, despite market warnings of potential oversupply in the global oil market.

Several major traders said that tightening supply in key markets is supporting oil prices, as much of the excess production comes from countries under Western sanctions, such as Russia and Iran. These crude oils are difficult to enter broader markets, making the market surprisingly resilient.

Since the beginning of the year, Brent crude futures prices have risen by approximately 11%. At the end of January, due to fears of new conflicts in the Middle East, Brent prices surged close to $71 per barrel, reaching a six-month high.

According to the International Energy Agency (IEA), global oil inventories last year accumulated at the fastest pace since the COVID-19 pandemic began, driven by increased production from OPEC+ and other American oil-producing countries such as Brazil and Guyana.

In April last year, Saudi Arabia unexpectedly led OPEC+ to quickly restore production that had been paused since 2023, despite widespread warnings at the time that global supply was already ample. This move shocked oil traders.

Some OPEC+ representatives said that this policy shift aimed to regain market share previously lost due to production cuts, which were taken over by competitors like U.S. shale producers. Analysts also speculate that Saudi Arabia’s move may have been to appease Trump, who had repeatedly called on OPEC to help lower fuel prices.

It is still unclear whether the organization will formally approve further production increases at the online meeting on March 1, but there are reports that they are inclined to increase output.

However, there appears to be disagreement among key members: Saudi Arabia and the UAE want to push for increased production, while Russia seems more cautious.

Earlier this month, Russian Deputy Prime Minister Alexander Novak stated that OPEC+ expects global oil demand to gradually grow starting from March or April. Meanwhile, Russia continues to face pressure from a lack of buyers for its crude oil, with its production declining for two consecutive months.

(Source: Caixin)