OPEC+ to Stick to Policy Despite Oil Price Rally

OPEC+ faced American and Indian calls to pump more oil, but it kept its production policy to stabilize the market (Reuters)
OPEC+ faced American and Indian calls to pump more oil, but it kept its production policy to stabilize the market (Reuters)
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OPEC+ to Stick to Policy Despite Oil Price Rally

OPEC+ faced American and Indian calls to pump more oil, but it kept its production policy to stabilize the market (Reuters)
OPEC+ faced American and Indian calls to pump more oil, but it kept its production policy to stabilize the market (Reuters)

OPEC+ will likely stick to existing policies of moderate output increases even as it expects demand to rise to new peaks this year and as oil prices trade near their highest since 2014.

The group, which comprises of the Organization of the Petroleum Exporting Countries and allies led by Russia and produces over 40% of global supply, has faced pressure from top consumers such as the United States and India to pump more to help the economic recovery from the pandemic.

But OPEC+ has refused to adhere to speedier increases of 400,000 barrels per day in March, arguing that the world is facing an energy shortage due to poorly calculated energy transitions to greener fuels by consuming nations.

Reuters quoted several OPEC+ sources as saying that prices had been pushed up by Russia-US tensions. Washington has accused Moscow of planning to invade Ukraine, which Russia denies.

OPEC+ oil output increases are complicated by the fact that several OPEC members have struggled to meet even current monthly targets and lack spare capacity to boost production any further.

Brent crude was trading up one percent above $90 a barrel on Wednesday and touched a seven-year high of $91.70 last week, amid tensions in Europe and the Middle East.

A report prepared by the committee, known as the Joint Technical Committee (JTC), and seen by Reuters, kept the 2022 forecast for world oil demand growth unchanged at 4.2 million bpd, and said demand would hit pre-pandemic levels in the second half of the year.

Oil demand was slightly above 100 million bpd in 2019 but was hammered by the pandemic in 2020, when OPEC+ cut its production by a record 10 million bpd or 10 percent of global supply.

The report still said the world would face a crude surplus in 2022 reaching 1.3 million bpd, slightly less than its previous forecast of 1.4 million bpd.

The remaining cuts stand at 2.6 million bpd and OPEC+ hopes to wind them down before the end of the year.



IMF Chief Sees Steady World Growth in 2025, Continuing Disinflation

 People visit the lantern festival at the Beijing's Wenyuhe Park in Beijing on January 4, 2025, to welcome the upcoming Chinese New Year on January 29, marking the beginning of the Year of the Snake. (AFP)
People visit the lantern festival at the Beijing's Wenyuhe Park in Beijing on January 4, 2025, to welcome the upcoming Chinese New Year on January 29, marking the beginning of the Year of the Snake. (AFP)
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IMF Chief Sees Steady World Growth in 2025, Continuing Disinflation

 People visit the lantern festival at the Beijing's Wenyuhe Park in Beijing on January 4, 2025, to welcome the upcoming Chinese New Year on January 29, marking the beginning of the Year of the Snake. (AFP)
People visit the lantern festival at the Beijing's Wenyuhe Park in Beijing on January 4, 2025, to welcome the upcoming Chinese New Year on January 29, marking the beginning of the Year of the Snake. (AFP)

The International Monetary Fund will forecast steady global growth and continuing disinflation when it releases an updated World Economic Outlook on Jan. 17, IMF Managing Director Kristalina Georgieva told reporters on Friday.

Georgieva said the US economy was doing "quite a bit better" than expected, although there was high uncertainty around the trade policies of the administration of President-elect Donald Trump that was adding to headwinds facing the global economy and driving long-term interest rates higher.

With inflation moving closer to the US Federal Reserve's target, and data showing a stable labor market, the Fed could afford to wait for more data before undertaking further interest rate cuts, she said. Overall, interest rates were expected to stay "somewhat higher for quite some time," she said.

The IMF will release an update to its global outlook on Jan. 17, just days before Trump takes office. Georgieva's comments are the first indication this year of the IMF's evolving global outlook, but she gave no detailed projections.

In October, the IMF raised its 2024 economic growth forecasts for the US, Brazil and Britain but cut them for China, Japan and the euro zone, citing risks from potential new trade wars, armed conflicts and tight monetary policy.

At the time, it left its forecast for 2024 global growth unchanged at the 3.2% projected in July, and lowered its global forecast for 3.2% growth in 2025 by one-tenth of a percentage point, warning that global medium-term growth would fade to 3.1% in five years, well below its pre-pandemic trend.

"Not surprisingly, given the size and role of the US economy, there is keen interest globally in the policy directions of the incoming administration, in particular on tariffs, taxes, deregulation and government efficiency," Georgieva said.

"This uncertainty is particularly high around the path for trade policy going forward, adding to the headwinds facing the global economy, especially for countries and regions that are more integrated in global supply chains, medium-sized economies, (and) Asia as a region."

Georgieva said it was "very unusual" that this uncertainty was expressed in higher long-term interest rates even though short-term interest rates had gone down, a trend not seen in recent history.

The IMF saw divergent trends in different regions, with growth expected to stall somewhat in the European Union and to weaken "a little" in India, while Brazil was facing somewhat higher inflation, Georgieva said.

In China, the world's second-largest economy after the United States, the IMF was seeing deflationary pressure and ongoing challenges with domestic demand, she said.

Lower-income countries, despite reform efforts, were in a position where any new shocks would hit them "quite negatively," she said.

Georgieva said it was notable that higher interest rates needed to combat inflation had not pushed the global economy into recession, but headline inflation developments were divergent, which meant central bankers needed to carefully monitor local data.

The strong US dollar could potentially result in higher funding costs for emerging market economies and especially low-income countries, she said.

Most countries needed to cut fiscal spending after high outlays during the COVID pandemic and adopt reforms to boost growth in a durable way, she said, adding that in most cases this could be done while protecting their growth prospects.

"Countries cannot borrow their way out. They can only grow out of this problem," she said, noting that the medium-growth prospects for the world were the lowest seen in decades.