SINGAPORE: The Organization of the Petroleum Exporting Countries and its allies, the group known as OPEC+, is expected to increase production for the first time in a couple of years in 2025, an S&P Global executive told a conference on Monday.
Last week, OPEC+ agreed to delay a planned oil output increase for October and November after crude prices hit their lowest in nine months, adding that it could further pause or reverse the hikes if needed.
"We think in 2025 for the first time in a couple of years, first time since 2022, OPEC+ will increase production," Jim Burkhard, vice president of research at S&P Global Commodity Insights, told the Asia Pacific Petroleum Conference (APPEC).
"There's a lot of pressure in some of these countries to increase production, and again, some are already producing above."
Oil futures jumped by a dollar in early Monday trade as a potential hurricane system approached the U.S. Gulf Coast, and as markets recovered from a sell-off following the weaker-than-expected U.S. jobs data on Friday.
Overall, oil prices have been under pressure due to concerns about waning demand in key economies China and the U.S. - despite earlier expectations of summer demand being supportive, dipping from more than US$90 a barrel earlier this year.
Soft demand in China, the world's second-biggest economy, is worrying markets, Ben Luckock, global head of oil at trader Trafigura, told the conference, adding that some market players believe Beijing may have more economic stimulus in reserve depending on the outcome of the U.S. presidential elections in November.
Oversupply
There is more oil currently produced globally than consumed and the balance is set only to worsen over the next couple of years, Torbjorn Tornqvist, co-founder and chairman with global energy trader Gunvor, told the same conference.
"The problem is not in OPEC, because they've done a great job to manage this," Tornqvist said. "But the problem is that they don't control where the growth is right now outside OPEC, and that's substantial."
The International Energy Agency (IEA) expects oil supply growth this year to reach 770,000 barrels per day (bpd), boosting total supply to a record 103 million bpd.
That growth is set to more than double next year to reach 1.8 million bpd, with the United States, Canada, Guyana and Brazil leading gains.
Trafigura's Luckock said oil prices may fall to US$60 a barrel relatively soon and Gunvor's Tornqvist said that oil's fair value was at US$70 per barrel.
West Texas Intermediate crude futures rose nearly US$1 to US$68.60 a barrel by 0420 GMT. Brent crude futures were also up around US$1 at US$71.98 a barrel.
S&P Global's Burkhard said that there is a lot of spare oil producing capacity globally currently, including more than 5 million bpd of unused capacity in the Middle East.
"Even if OPEC+ does not increase (production)... the capacity is still going to be higher, which means there's going to be unused capacity sitting there on the sidelines, and that is going to...(put) downward pressure on prices," he said.