Biggest loser with $100 oil

The world’s largest oil exporters will benefit from a sudden OPEC+ production cut, but if oil prices rise from here and reach $90 or even $100 a barrel, as some analysts predict, oil importers will start to feel the pain.

Brent crude rebound to $85, and West Texas Intermediate Crude It hit $80 a barrel again, as the latest production cuts of 1.66 million barrels per day from nearly half of OPEC+ members from May to December are expected to tighten the market in the second half of the year. Analysts, who had just cut price forecasts in the wake of jitters in the banking sector in mid-March, raised their estimates for prices and He started talking about $100 oil once again.

The price of oil at $90 and $100 will affect the economies of the major oil importers. A renewed rise in energy prices could keep inflation in the US and Europe stubbornly high and further complicate central banks’ interest rate policies, which have just indicated that the end of the rising cycle may be near.

In terms of state finances, major oil importers will not be affected to the same extent by higher oil prices.

The US will see higher gasoline prices, but it will not be the biggest loser, at least financially, from the OPEC+ cuts. In the US, the loser is the Biden administration, which has spent nearly a year trying to convince Americans that the president has helped lower prices at the pump, which hit a record low in early June when oil prices were at $100 a barrel in the spring of 2022 after Russian invasion of Ukraine.

Related: Drilling activity continues to decline in the US

“The oil market has had a few days to digest the OPEC news and speculate as to why. That has stabilized the price of oil for the time being,” said Andrew Gross, a spokesman for AAA. He said This week, “but the cost of oil is more than 50% of what we pay at the pump, so drivers may not be stuck at the pump anytime soon.”

The national gasoline price averaged $3.54 a gallon this week, the highest since Thanksgiving, He said Patrick De Haan, Head of Petroleum Analysis at GasBuddy, the fuel-saving app.

He added that the increases are likely to continue over the next two weeks with the potential for a rise to around $3.65/gal for the time being.

In terms of a financial hit to the government from the OPEC+ cuts, the biggest losers will be the economies of developed Asia that are highly dependent on oil imports, as well as emerging markets in South and Southeast Asia, which are not only dependent on imported energy but also have financial vulnerability. balances. These are the mature economies of Japan and South Korea, emerging markets India and Pakistan in South Asia, as well as Argentina, Turkey and South Africa, according to Pavel Molchanov, managing director of private investment bank Raymond James.

Molchanov said that the OPEC+ cuts and the subsequent rise in oil prices to $100 are “a tax on every oil-importing economy.” CNBC.

“It won’t be the United States that will feel the most pain from $100 oil, it will be the countries that don’t have domestic petroleum resources: Japan, India, Germany and France,” he added.

According to Henning Gloystein, Eurasia Group Director, India consumption – Currently in the records It could also suffer if prices rise further because even discounted Russian crude, which India buys in bulk, will see higher prices if international benchmarks hit $100.

Traders involved in the Russian oil trade told Reuters this week that after the announcement of the OPEC+ cut, the price of Russia’s main Urals crude. It topped $60 The price ceiling level per barrel set by the G7.

“If the price of oil goes up further, discounted Russian crude will start to hurt India’s growth,” Gloystein told CNBC.

Analysts say importing countries with weak currencies and weak state finances will feel the pain due to the fact that oil is priced in US dollars.

By Tsvetana Paraskova for Oilprice.com

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