Reuters
There are two factors outside OPEC+’s control that will likely determine oil prices in the coming weeks.
The first is whether U.S. President Donald Trump decides to launch a gunfight with Iran, and if so, whether both sides can keep their oil cargo transportation and production infrastructure intact.
The second question is whether China, the world’s largest oil importer, will decide to ease its recent boom in imports after benchmark Brent crude oil futures rose 16% in January.
Given the current level of uncertainty gripping the oil market, it makes sense that the eight OPEC+ members with production quotas would not make any changes to their production policies at Sunday’s meeting.
The eight OPEC+ member states, which supply about half of the world’s oil, will raise production quotas by about 2.9 million barrels per day from April to December 2025, equivalent to about 3% of global demand. Subsequently, plans for further increases from January to March 2026 were frozen, citing the seasonal slump in consumption.
In a sense, things are progressing in favor of export groups.
Prices are rising, but not high enough to spark concerns about a resurgence in inflation or slowing economic growth in importing countries.
Brent crude oil prices closed at $70.69 per barrel on January 30, just shy of the six-month high of $71.89 hit a day earlier.
Market narratives about oversupply have also largely disappeared from media and analyst discourse, with focus on the restructuring of Venezuelan oil flows after the US intervention that led to the detention of President Nicolás Maduro, and current tensions with Iran.
The situation in Iran is the biggest challenge for OPEC+. Prolonged military conflict in the Middle East is not in their interest, even though they enjoy a risk premium of perhaps $7 to $8 at current oil prices.
OPEC+ members such as Saudi Arabia can lobby the United States, but ultimately President Trump is likely to make his own calculations about whether he can achieve whatever goals he seeks by attacking Iran while keeping oil prices low enough to avoid public anger and inflation at home.
For now, the oil risk premium is likely to remain in place until we know what action the US will take and the consequences of that action.
china import
However, one effect of January’s price increase is that China may ease oil imports. 29dk2902l
Arrivals from China hit a record high of 13.18 million barrels per day (bpd) in December and are likely to remain strong in January, with commodity analyst Kpler tracking seaborne arrivals at 10.4 million barrels per day (bpd), plus about 1 million barrels of pipeline imports, for a total of about 11.4 million barrels per day.
Crude to arrive in December and January is supposed to be arranged three months to four weeks in advance, at a time when oil prices were relatively low, with Brent crude falling to a seven-month low of $58.72 a barrel on Dec. 16.
With current prices above $70 per barrel, China is likely to reduce imports to levels sufficient to meet consumption and refrain from adding crude oil to its strategic stockpiles.
China does not disclose flows into or out of commercial or strategic stockpiles, but it imports far more crude oil than it can process.
China’s surplus crude oil can be calculated by adding imports and domestic production and subtracting refining processing.
Based on this, China’s surplus oil would be 1.13 million barrels per day in 2025, and although not all of this will be added to inventories, this indicates that China was taking advantage of low oil prices to siphon off much of the expected supply surplus.
Past spikes in oil prices have reduced imports from China, and if this trend is repeated, the number of tankers arriving at Chinese ports is likely to decline in late March and April.
If China were to cut its imports by about 1 million barrels per day, talk of oversupply would likely return, especially if whatever happens between the US and Iran does not affect oil shipments or infrastructure.
Enjoying this column? Check out Reuters Open Interest (ROI), the essential new source for global financial commentary. ROI provides thought-provoking, data-driven analysis on everything from swap rates to soybeans. Markets are moving faster than ever. ROI helps you keep going. Follow ROI on LinkedIn and X.
The views expressed here are those of the author, a Reuters columnist.
Share this:
