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OPEC+ Output Cuts Likely to be Extended Until End of 2020

FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
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OPEC+ Output Cuts Likely to be Extended Until End of 2020

FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

Saudi Arabia and some other OPEC oil producers are considering extending record high output cuts until the end of 2020 but have yet to win support from Russia, OPEC+ and Russian industry sources told Reuters.

The Organization of the Petroleum Exporting Countries and other producers led by Russia, a group known as OPEC+, agreed last month to cut output by 9.7 million barrels per day (bpd) in May and June.
The coronavirus pandemic has worsened oversupply in the oil market by slashing demand which has in turn hammered prices.

So instead of easing their output cuts come July, several OPEC+ sources told Reuters there are discussions led by de facto OPEC leader Saudi Arabia about sustaining those cuts.

“The Saudis see that the market still needs support and want to roll over the same cuts until end of the year. The Russians also want the same but the problem again is with the oil companies,” one OPEC+ source said.

Russian Energy Minister Alexander Novak met with domestic major oil companies on Tuesday to discuss the possible extension of the current level of cuts beyond June.

Sources familiar with Russian oil thinking said no decision was made as opinions are divided, with some arguing Moscow should wait to see demand levels as airlines begin to fly again.

“Of course if we are told to continue with the cuts, we will obey. But if the demand is OK, we don’t see a reason to change the deal,” said one source at a Russian oil company, referring to the current pact calling for cuts through June.

Russia’s Novak had said he expected the oil market to balance out in June/July as oil demand recovers amid easing lockdowns.

The Russian source agreed with that assessment, which may show that Moscow sees no need for changes to the current deal.

Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further “close coordination” on oil output restrictions.

The OPEC+ group is due to hold an online conference in the second week of June to discuss their output policy.

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While Global Oil Demand Drops, US Drivers Keep Buying More Gas

A man stands near his car at a gas station in Austin, Texas - July 10, 2026 (AFP)
A man stands near his car at a gas station in Austin, Texas - July 10, 2026 (AFP)
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While Global Oil Demand Drops, US Drivers Keep Buying More Gas

A man stands near his car at a gas station in Austin, Texas - July 10, 2026 (AFP)
A man stands near his car at a gas station in Austin, Texas - July 10, 2026 (AFP)

While global oil demand is set to decline this year due to the US-Iran conflict, gasoline consumption in the United States increased in the second quarter of 2026.

Gasoline prices surpassed $4.50 on average for a gallon of regular in the US in May, rising more than 50% since the start of the war, according to AAA data.

But that didn’t stop drivers from hitting the road; in fact, gasoline consumption rose in the US during the second quarter of the year, according to AP.

One reason may be because the percentage of household income spent on gasoline in the US has been declining for years, said Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University. Plus, many people have been transitioning from remote work to in-office jobs, he added.

“Even though it’s a really political price that people pay a lot of attention to, if you are in the higher quintiles of income in the US, you might grumble about it, but you’re not really driving less just because of that increase in prices,” Sternoff said.

Jim Burkhard, vice president and head of crude oil research at S&P Global Energy, said, “The future of Hormuz is probably more uncertain today than it was at the beginning of the war.”

Burkhard said Iran is still trying to control the strait, while the US has not been able to fully restore normal operations, making a return to prewar conditions unlikely.

Global oil demand averaged just 97.9 million barrels per day in May, down 5.3 million barrels per day from a year earlier. Much of the decline was in Asia, which relies heavily on oil from the Middle East.

According to a report from the International Energy Agency Global, oil demand is set to decline this year for the first time since the height of the COVID-19 pandemic in 2020.

The drop, which the agency expects to amount to about 1 million barrels per day in 2026, is due to higher oil prices and disruptions to physical supply that weighed heavily, but unevenly, on various parts of the world, the report said.

The supply disruptions were caused by the war between the US and Iran, which left ships loaded with crude oil stranded in the Arabian Gulf for more than three months, unable to safely travel through the Strait of Hormuz, a major route for oil and gas shipments.

But the main exception to the global slump in oil usage was in the US, where gasoline use increased in the second quarter of 2026, despite the fact that pump prices were about 50% above their prewar levels in May, the report said.

Business

Eni Warns Oil Market Risks Breaking Out of Current Range if Iran War Continues

Tugboats guide the crude oil tanker Odessa, carrying UAE crude after passing through the Strait of Hormuz with its Automatic Identification System transponder turned off, navigates the waters at Daesan port, where it is expected to discharge crude oil, in Seosan, South Korea, May 8, 2026. (Reuters)
Tugboats guide the crude oil tanker Odessa, carrying UAE crude after passing through the Strait of Hormuz with its Automatic Identification System transponder turned off, navigates the waters at Daesan port, where it is expected to discharge crude oil, in Seosan, South Korea, May 8, 2026. (Reuters)
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Eni Warns Oil Market Risks Breaking Out of Current Range if Iran War Continues

Tugboats guide the crude oil tanker Odessa, carrying UAE crude after passing through the Strait of Hormuz with its Automatic Identification System transponder turned off, navigates the waters at Daesan port, where it is expected to discharge crude oil, in Seosan, South Korea, May 8, 2026. (Reuters)
Tugboats guide the crude oil tanker Odessa, carrying UAE crude after passing through the Strait of Hormuz with its Automatic Identification System transponder turned off, navigates the waters at Daesan port, where it is expected to discharge crude oil, in Seosan, South Korea, May 8, 2026. (Reuters)

The global oil market will break out of its roughly $80-$100 range by the first quarter of 2027 at the latest, boosting inflation and reducing energy demand, if the Middle East conflict continues, Claudio Descalzi, the CEO of Italian state-controlled group Eni said.

The release of stockpiles has helped to keep crude prices largely within that range ⁠so far, he said in an interview with Il Sole 24 Ore newspaper published on Saturday.

Oil prices ended the week with solid gains despite easing from their midweek peaks following renewed US-Iran hostilities and attacks on shipping in the Strait of Hormuz.

Brent crude climbed above $75 a barrel before falling to the $70 averages, close to its pre-war trading.

Descalzi said the strategy carries growing risks because global reserves are finite.

“The long-term solution is greater energy security through diversification of supply sources and routes,” he said.

In March, the International Energy Agency (IEA) said its member countries have agreed to release 400 million barrels of oil in an attempt to bring down oil prices as the Iran crisis and the consequent disruption of shipments through the Strait of Hormuz inflicted massive shocks to energy markets.

The IEA’s maximum drawdown capability aims to decrease the safety margin in oil markets, increasing the likelihood of sharp, structural price fluctuations if any new supply disruptions emerge.

Every $5 increase in oil prices adds roughly $190 billion ⁠in annual costs to the global economy, according to Reuters calculations based on oil demand of 104 million barrels per day.

At current Brent prices, it would likely cost more than $70 billion to replace reserves drawn down ⁠to mitigate Iran war supply loss.

Descalzi said global oil stocks have fallen by an average 3.8 million barrels per day, accelerating ⁠to 4.6 million bpd in May, as a result of disruption linked to the Iran war that began at the end of February.

He said countries should focus on producers in North ⁠and sub-Saharan Africa, Latin America and Southeast Asia, while reducing dependence on controlled maritime passages.

Eni has limited exposure to the ⁠Middle East, while most of its upstream production is in Africa and Latin America.

Power demand generated by artificial ⁠intelligence technologies and the rapid expansion of data centers has increased the urgency of ensuring security of energy supply.

Business

Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)
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Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)

Fitch Ratings has affirmed Saudi Arabia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at "A+" with a Stable Outlook, the agency said on Friday.

The rating reflects strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets (SNFA) considerably stronger than the "A" and "AA'" medians, and significant fiscal buffers in the form of deposits and other public sector assets, it added.

"Oil dependence and World Bank Governance Indicators (WBGI) have improved but remain weaknesses. Geopolitical risk is high, but the economy and public finances have been resilient to the US-Iran war," it stressed.

"Fitch forecasts real GDP growth will slow to 0.6% in 2026 due to disruption to trade caused by the closure of the Strait of Hormuz," it continued.

"Flows through the East-West pipeline supported oil production during the war and we expect output to be ramped up to meet external demand following the reopening of the Strait and to rebuild domestic stocks, but at an annual average of 9m b/d it will be below the 2025 level," it said.

"Non-oil growth will be hit by an inability to export petrochemicals during the closure of the Strait, but consumer spending held up and business confidence is recovering."

"Growth will rebound in 2027 as the normalization of flows through the Strait allows higher oil and petrochemicals production, before easing to 2.9% in 2028 The phased opening of gigaprojects (many of which have launched initial operations), the proximity of key events and guidance that the Public Investment Fund will keep domestic spending largely unchanged in its new five-year plan, will also support growth," Fitch noted.

The King Fahd Industrial Port in Yanbu, Saudi Arabia (SPA)

"The fiscal deficit is projected to narrow in 2026 owing to higher oil revenues, as prices will offset lower volumes. Spending will also rise, reflecting the impact of the war, but much of the jump in 1Q was the precautionary frontloading of spending from later in the year," it said.

Fitch forecasts that lower oil revenues will widen the deficit to 4.7% in 2027, consistent with a fiscal breakeven oil price of USD94/b.

Spending is expected to decline in 2027, due to an easing of war-related pressures, lower capex and ongoing efforts to reduce rigidities in current spending. Expenditure adjustment will allow the deficit to narrow in 2028 despite a projected further fall in oil prices.

"Our fiscal projections are consistent with a further increase in debt/GDP, which we project at 41.3% at end-2028 (projected peer median of 58.1%), from 31.8% at end-2025. based on deposits remaining around 10% of GDP," said Fitch.

"Fitch forecasts a small current account surplus for 2026 due to higher oil export revenues. Lower oil prices and ongoing domestic demand growth that has a heavy component of imported goods, services and labor, will lead to a deficit of 5% of GDP by 2028. Current account deficits will be financed by external borrowing and the ongoing reorientation of public assets to domestic from foreign investments," it continued.

"Banks have been resilient to the war and did not require any support measures from the central bank," it stressed. "At end-1Q, non-performing loans were 1.1% and the Tier 1 capital ratio 19.2%, both improved from end-2024. Credit growth has slowed, particularly mortgages, in response to policy measures, and is being outpaced by deposit growth."

Fitch maintained its mid-year 2026 sector outlook for Saudi banks at "neutral".