Oil prices rose early Tuesday as OPEC+ members prepared for their upcoming meeting, where they are expected to extend production cuts into 2025. The move comes as global oil markets face ongoing supply challenges. Meanwhile, US President-elect Donald Trump has warned that he will impose a 100% tariff on BRICS countries if they attempt to create an alternative currency to the US dollar, threatening to block them from the “wonderful US economy.”
China has already started trading Iranian crude in yuan, and Brazil’s President Lula da Silva proposed a South American common currency last year to reduce reliance on the US dollar. Despite these efforts, the US dollar still dominates global markets, accounting for about 88% of all trades in the $7.5 trillion-per-day foreign exchange market. However, the greenback’s share in global foreign exchange reserves has recently dipped below 60%.
BRICS countries now control more than 40% of global central bank reserves and account for 25% of global oil demand. As sanctions have pushed Russian oil to India, these nations have grown more interconnected in commodity trading.
In corporate news, US oil giant ExxonMobil is reportedly looking to sell its retail business in Singapore, valued at around $1 billion. This comes just months after the company sold its Malaysian assets to Petronas. French energy major TotalEnergies is also finalizing the purchase of renewable energy developer VSB Group for $2.1 billion, while Spain’s Repsol has agreed to sell its Colombian oil and gas assets to Geopark for $530 million.
OPEC+ Output Cuts Likely to Continue
Oil prices have regained some of their previous losses, with ICE Brent approaching $73 per barrel. This comes as expectations grow that OPEC+ will extend its output cuts into 2025. A slight uptick in Chinese oil imports, driven by higher Russian and Iraqi imports, has also contributed to the positive outlook. However, futures trading remains subdued, and major price movements are expected only after the OPEC+ meeting.
OPEC+ is aligning on an extension of its output cuts until the end of Q1 2025, partly due to concerns over rising non-OPEC supply and sluggish global demand. The decision comes amid a visit by Saudi Crown Prince Mohammed bin Salman to the UAE, his first in three years.
Sanctions and Production Updates
The US has expanded sanctions on Iranian oil shipments, which has slowed trade between Iran and China. The National Iranian Oil Company (NIOC) has offered fewer cargoes, and those that are available are priced about $2 per barrel below Brent.
Libya’s oil production has surged to an 11-year high, reaching 1.4 million barrels per day (b/d) after the end of a long-standing blockade. The country aims to increase output by an additional 100,000 b/d by the end of the year.
In Norway, the government has canceled its first deep-sea mining licensing round, scheduled for 2025, after pressure from environmental groups. However, this move is expected to be temporary, with a potential revival of the licensing process soon.
New Exploration and Energy Shifts
Brazil has announced plans to offer 91 oil blocks in its 2025 licensing round, which includes 11 new prospects in the country’s coveted pre-salt basins. Meanwhile, German electricity generation has dropped to its lowest in seven years due to a prolonged wind lull, with the country continuing to rely on electricity imports.
On the positive side, Portugal’s Galp Energia has confirmed the discovery of high-quality oil and gas condensate at the Mopane field offshore Namibia, further boosting the country’s energy outlook.
US and Global Energy Updates
In the US, natural gas inventories are at their highest levels since 2016, totaling 3,922 billion cubic feet (Bcf), or 6% above the five-year average. Despite lower-than-average injections for most of 2024, the stockpile remains strong.
US crude oil production fell by 157,000 b/d in September, marking the largest monthly decline since January, due in part to hurricanes that forced offshore producers to shut down.
International Tensions and Trade Movements
President-elect Trump’s tough stance on crude imports is evident, with reports confirming his intention to impose a 25% tariff on Canadian oil imports. The US imports about 4.5 million b/d of Canadian oil, making it a significant target in the trade dispute.
Meanwhile, China has banned exports of key minerals, including gallium, germanium, and antimony, to the US in anticipation of further tariffs. This move follows a new directive in Beijing regarding dual-use items, which are critical for both civilian and military purposes.
In India, the government has canceled its windfall tax on domestic crude production and oil exports, citing lower global oil prices. This marks the end of the tax, which had been in place since 2022.
Finally, Japan’s planned $15 billion takeover of US Steel by Nippon Steel seems increasingly unlikely, with Trump reiterating his opposition to the deal. The US President-elect has emphasized policies to strengthen domestic steel production through tax incentives and tariffs.
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