Oil Market News: Oil Prices Jump as OPEC+ Delays Output Hike

TotalEnergies predicts that global oil demand will peak after 2030 in its most likely scenarios, driven by population growth, slow power grid investments, and lagging electric vehicle sales. This projection, however, falls short of the Paris Climate Agreement’s goal to limit global warming to 2 degrees Celsius. The company highlights the significant energy needs of developing nations and the necessity to quadruple current energy production to alleviate energy poverty.

While acknowledging the need for a transition to cleaner energy sources, TotalEnergies defends its continued exploration of new oil and gas projects. They argue that these projects are essential to maintain production levels and offset the natural decline of existing fields. The company emphasizes a pragmatic approach, advocating for the rapid deployment of readily available technologies like renewables and gas-fired plants, alongside electric vehicles and LPG for cooking in developing countries.

TotalEnergies’ outlook suggests a gradual energy transition, with the United States leading the way due to its domestic energy resources. In contrast, China and India continue to rely on coal-fired plants, highlighting the complexities and regional variations in achieving global decarbonization goals. The company anticipates a significant role for technologies like carbon capture and storage, hydrogen fuel cells, and e-fuels in the coming decades.

India’s Oil Minister, Hardeep Singh Puri, has called for discussions between oil-producing and consuming nations to address price volatility and ensure market stability.

Puri emphasized the need for “predictability and stability” in oil prices, highlighting India’s reliance on imports for over 80% of its oil needs. The call for dialogue comes as India has increasingly turned to discounted Russian oil, making Russia its largest supplier.

Oil prices are up 2.75%, creating a ripple effect across the energy sector and driving up the share prices of several major oil companies.

Among the notable gainers were ExxonMobil, which saw its share price climb by 2.73%, and CVE, with an increase of 2.39%. BP and PBR also experienced healthy gains, rising by 1.88% and 1.75% respectively.

Shell, TTE, SU, and EQNR demonstrated more moderate growth, with increases ranging from 1.1% to 2%.

The decision by OPEC+ to delay its planned output hike sent oil prices climbing rapidly on Monday morning, just as its announcement of the original output hike plan sent prices falling.

While the group maintains that its function is to maintain stability in the oil market, its recent actions have drawn criticism from various figures in the oil industry.

The CEO of energy giant Eni Claudio Descalzi noted that the volatility caused by these announcements is undermining much-needed investment in the energy sector.

ING’s commodities strategists Warren Patterson and Ewa Manthey said the move might “leave the market having to rethink the strategy of OPEC+,” calling into question the group’s stated goal of boosting stability in oil markets.

OPEC+ has postponed its plan to increase oil production by 180,000 barrels per day, originally scheduled for December. This decision was made in response to the current depressed oil prices, with the group opting to support price stability over increased market share. As a result, Brent crude oil prices rose above $74.90 per barrel, and West Texas Intermediate reached $71.52 per barrel.

Analysts are divided on the long-term impact of this decision. Some, like those at ING, believe that this signals OPEC+’s commitment to maintaining higher prices, even if it means potentially losing market share. Others, like IG’s Yeap Jun Rong, are skeptical that this price increase will be sustained, predicting resistance around $78 per barrel.

The market remains uncertain about the future direction of oil prices. While OPEC+’s decision provides a temporary boost, concerns linger about the potential for a supply surplus in 2025 if the group doesn’t continue with production cuts. The coming months will be crucial in determining whether OPEC+ can successfully balance its price and market share objectives.