Top Oil Producers to Meet amid Record Crude Prices

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
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Top Oil Producers to Meet amid Record Crude Prices

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo

The world's top oil-producing countries will meet on Wednesday to discuss a further increase in output, while crude prices have reached seven-year highs rattled by geopolitical tensions.

Part of their regular meetings since the Covid-19 pandemic shook markets, the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies convene by videoconference to set output.

Many analysts expect the grouping, including Saudi Arabia and Russia, to decide to continue to boost output by 400,000 barrels per day in March.

This will be in line with their strategy to slowly re-open the taps since May last year, after drastic cuts to curb slumping prices when the coronavirus first started spreading.

"With that said, we wouldn't completely rule out a larger increase, given high oil prices and recent OPEC+ underproduction," Capital Economics analysts said.

Brent oil on Wednesday surpassed $90 per barrel, attaining a level last seen in October 2014.

The price of West Texas Intermediate (WTI) crude hit its highest level in more than seven years earlier this month, fueled by easing concerns about the Omicron Covid variant and geopolitical tensions.

- Russia sanctions? -
The United States and Britain on Sunday flagged new and "devastating" economic sanctions against Russia, as Washington and its NATO allies step up efforts to deter any invasion of Ukraine.

Fears of an imminent invasion have grown in recent days, despite denials from Moscow and pleas from Ukraine's president to avoid stirring "panic" over the massive Russian military build-up on the border.

A Russian invasion of Ukraine would lead to "very hard sanctions" against Moscow, according to Bjarne Schieldrop, analyst at SEB.

"It would halt exports of natural gas to Europe even more. Natural gas and power prices in Europe would be much higher than the current extremely high prices we have now," he told AFP.

In the Middle East, Yemen's Iran-backed Huthi militants launched two missile attacks on the United Arab Emirates this month.

- Struggling to meet targets -
Besides the geopolitical uncertainties, analysts have noted that OPEC nations and other key producers are struggling to meet targets to lift output by 400,000 barrels a month, adding to the upward pressure on prices.

"OPEC+ underperformance and inaction support elevated oil prices as the group has underdelivered against its stated production targets by hundreds of thousands of barrels," Rystad Energy analyst Louise Dickson said.

The grouping "has committed to a passive role in the conversation despite external pressure primarily from the US, to increase production and ease fuel prices," she added.



IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."