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IOL News
21 hours ago
- Business
- IOL News
Fuel price pain as missiles fly
While missiles fly thousands of kilometres away, the effects of a deepening conflict between Israel and Iran are beginning to reach South African shores - not through politics or security, but through rising prices at the pump and pressure on already-stretched household budgets. A surge in global oil prices, triggered by military strikes on strategic energy assets and growing fears of supply disruption, is stoking inflation concerns that could ripple through the economy and stall any hopes of interest rate relief. The bombardment of Iranian military targets by Isreal erupted over a week ago as airstrikes targeted Iranian military infrastructure, including pivotal oil and gas facilities such as the South Pars gas field and the Shahr Rey oil refinery, provoking retaliatory missile attacks by Iran on major Israeli cities. This has raised alarm bells among market watchers, particularly given Iran's critical role as the third-largest oil producer within the Organisation of the Petroleum Exporting Countries (OPEC+), contributing around four million barrels of crude oil per day and controlling access to the vital Strait of Hormuz. The Strait of Hormuz is a crucial maritime chokepoint through which approximately 18–19 million barrels per day or 20% of global oil shipments pass, making any potential disruption a considerable concern for worldwide oil supply. Despite Iran maintaining crude exports at 2.2 million barrels per day amid the conflict, rising shipping costs and delays due to the potential blockade of this strategic waterway could influence inflation across the globe. Nolan Wapenaar, co-chief investment officer at Anchor Capital, on Friday said the blockade of the Strait of Hormuz would have far-reaching consequences for South Africa's economy. Wapenaar said this would obviously be a major blockage in the supply of oil to the rest of the globe. 'This could drastically impact the availability of oil and one would expect significantly higher prices. The clear impact in South Africa is higher inflation and quite potentially rising interest rates again,' Wapenaar said. 'The impact of a major supply shock to oil will be more pronounced and detrimental to South Africa. We would expect pressure on the terms of trade from rising oil prices, the South African rand could well weaken, exacerbating inflation pressures beyond just the impact of oil prices and supply.' According to the OPEC+, the global oil demand growth forecast for 2025 remains at 1.3 million barrels per day. The eight OPEC+ countries, which previously announced additional voluntary adjustments, have agreed to start a gradual and flexible return of the 2.2 million barrels per day by implementing a production adjustment of 411 000 barrels per day in July 2025 in view of a steady global economic outlook and current healthy market fundamentals. Analysts warn that the conflict has the potential to reshape power relations within the Middle East and influence OPECʼs internal dynamics as Iran's role as a major oil producer and its strategic position in the Gulf give it considerable leverage. Bianca Botes, director at Citadel Global, said the Strait of Hormuzʼs strategic importance cannot be overstated. 'Any disruption – whether due to military action, electronic interference affecting navigation systems, or blockades – could severely constrain global oil supply. Recent incidents, such as the collision and fire involving two oil tankers near the strait, have heightened these concerns,' Botes said. 'While OPEC members possess some excess production capacity that could theoretically offset Iranian supply losses, the risk of a prolonged or expanded conflict introduces significant uncertainty. 'Analysts warn that oil prices could spike to $100/barrel or even $120/barrel if supply through the Strait of Hormuz is disrupted. Such a price shock would reverberate through global markets, impacting inflation, consumer costs, and economic growth worldwide.' South Africa consumes around 530 000 barrels of oil per day, or more than 25 million litres of petroleum products each year, facilitated by imports and its three operational refiners. Petrol and diesel are the most important petroleum products, accounting for more than 85% of consumption. While the country refines imported crude oil, a portion of its fuel supply also comes from synthetic fuels produced from coal and natural gas. The increase in the fuel price would come as consumers are already battling with the high cost of living after the finance minister hiked the General Fuel Levy (GFL) by 16 cents per litre for petrol and 15 cents per litre for diesel — the first increase in three years — on the back of inflationary pressures. The price of Brent crude oil traded around $77 (around R1 390) per barrel on Friday, heading for a third consecutive weekly gain as escalating hostilities in the Middle East continued to fuel fears of regional supply disruptions. However, Investec chief economist Annabel Bishop allayed fears of any fuel supply shortages but said the blockade of the Strait of Hormuz would raise shipping costs, impacting inflation and also increase shipping delays. 'South Africa mainly gets oil from Africa and Saudi Arabia (which is expected to stay out of the conflict) so the supply is not expected to be interrupted,' Bishop said. 'We are less impacted as we get our oil supply from Africa not the middle east and are food secure. We would be impacted on price not supply as all oil is priced off Brent crude.' Rising oil prices have immediate and far-reaching consequences. Higher crude costs translate into increased transportation and manufacturing expenses, feeding into broader inflationary pressures. This dynamic can slow economic activity by reducing consumer purchasing power and increasing production costs. Inflation in South Africa has held steady at 2.8%, paving the way for potential interest rate cuts though several factors may yet cause the Reserve Bank to adopt a more hawkish stance. Everest Wealth CEO, Thys van Zyl, said rising tensions in the Middle East and discussions about lowering South Africa's inflation target band were two key concerns that could temper expectations of further rate cuts. 'This conflict could quickly filter through to fuel prices and transport inflation – and that will narrow the room for rate cuts,' Van Zyl said. 'Although food inflation rose sharply in May due to the impact of foot-and-mouth disease on beef prices, transport inflation was the only category with negative growth thanks to the past year's decline in fuel prices – which helped keep overall inflation low.' BUSINESS REPORT
News18
4 days ago
- Business
- News18
Israel-Iran War: No Cause For Alarm Over Crude Oil Supplies At Present, Say Indian Govt Sources
Last Updated: The market is experiencing an oversupply, with no imminent risk of shortage, the sources added There is no cause for alarm regarding the global crude oil supply at present amid the Israel-Iran conflict and tensions in West Asia, Indian government sources told CNN-News18 on Tuesday. The market is experiencing an oversupply, with no imminent risk of shortage, they added. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are producing approximately 120 million barrels per day. However, production has been slightly reduced by 5 million barrels, bringing the current production level to roughly 97 million barrels per day. Additionally, countries in the Western Hemisphere, such as Guyana, Brazil, and the United States, have become significant oil suppliers, contributing to the increasing global supply. The supply chains remain uninterrupted through key maritime routes, including the strategically vital Strait of Hormuz. Despite ongoing geopolitical dynamics, such as those involving Iran and China, the global oil supply chains continue to function efficiently. For India, which consumes 5.6 million barrels of oil per day, only 1.5 to 2 million barrels are transported through the Strait of Hormuz, indicating a reduced dependency on this route. India has successfully diversified its oil sources, increasing from 27 countries previously to 40 countries currently. This diversification strategy has enhanced the nation's energy security. In terms of strategic reserves, India maintains ample stock, ensuring that alternative sources can be tapped in case of a supply disruption. For liquefied petroleum gas (LPG), 50% of the demand is met domestically, and stock levels are adequate to meet current requirements. In terms of export controls, India has the capability to halt oil exports if necessary to prioritise domestic availability. The government conducts daily review meetings to monitor the situation closely and ensure proactive responses to any changes. Among India's crude imports, 38% come from Russia. Furthermore, the Oil and Natural Gas Corporation (ONGC) has drilled 500 wells, providing India with access to reserves amounting to 42 billion barrels. Regarding the price outlook, while marginal increases in freight and insurance costs may occur, the market has largely already factored in these changes. The overall situation appears stable, with sufficient measures in place to manage any potential disruptions effectively. India is closely monitoring the Iran-Israel conflict to assess its impact on crude oil and gas supply, government sources said. Officials at the petroleum and natural gas ministry are evaluating the potential effects of escalating tensions between Iran and Israel on India's oil supply. Government sources have stated that due to India's diversified energy sources and its reliance on countries in the Western Hemisphere, the nation is prepared for any potential shortages. It has reserves in place for several weeks. India will consider increasing supply from alternative energy sources, including those from West African nations, to ensure fuel supply security in case Iran blocks the Strait of Hormuz. Sources have indicated that there is an ample supply of crude oil coming to the market, so there is no shortage. India is receiving oil from Brazil, Guyana, Canada, the US, and other countries as well. Up until 2025, the Strait of Hormuz has never been completely closed. Only a third of India's oil supply comes through this route. India is also factoring in increased freight corridor charges and a rise in pricing. Senior oil ministry officials and industry leaders are conducting scenario analyses and preparing contingency plans for potential supply disruptions and price volatility, said sources. The oil ministry reports that India maintains crude oil and petroleum product storage facilities capable of meeting 74 days of domestic consumption requirements. The strategic petroleum reserves account for 9.5 days of this total capacity. Get breaking news, in-depth analysis, and expert perspectives on everything from geopolitics to diplomacy and global trends. Stay informed with the latest world news only on News18. Download the News18 App to stay updated! First Published: June 17, 2025, 17:36 IST
Barnama
26-05-2025
- Business
- Barnama
Rubber Market Ends Mixed Amid Lower Oil Prices, Stronger Ringgit
By Nur Athirah Mohd Shaharuddin KUALA LUMPUR, May 23 (Bernama) -- The Malaysian rubber market closed mixed today, weighed down by declining crude oil prices and a firmer ringgit against the US dollar, a dealer said. She told Bernama that market sentiment was also influenced by movements in regional rubber futures markets. As of 5.10 pm, Brent crude oil prices had declined by 0.76 per cent to US$64.04 per barrel. At the time of writing, the local currency strengthened to 4.2285/4.2350 against the greenback, compared to Thursday's close of 4.2705/2765. 'Oil prices dropped for a fourth consecutive session on Friday and were set for their first weekly decline in three weeks, weighed down by renewed supply pressure from another possible output hike by the Organisation of the Petroleum Exporting Countries Plus (OPEC+) in July. 'Thailand's meteorological agency also warned farmers of possible crop damage, adding that heavy rains and accumulation may cause flash floods from May 23–27, 2025,' said the dealer. At 3 pm, the Malaysian Rubber Board reported that the price of Standard Malaysian Rubber (SMR 20) decreased by 4.50 sen to 740.50 sen per kilogramme (kg), while latex in bulk rose five sen to 627.0 sen per kg. -- BERNAMA
Euronews
23-05-2025
- Business
- Euronews
Oil prices falls as OPEC+ considers output hike before US-Iran talks
Crude oil prices fell for a third consecutive trading day on Thursday ahead of the US-Iran nuclear talks. Traders are growing concerned about the possible return of oil supply from Iran, which holds around one-third of the world's oil reserves. Adding to the pressure, a Bloomberg report stated that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) is considering a third consecutive production hike in July, compounding fears of an oversupplied market. Oil prices continued to decline during Friday's Asian session. As of 4:40 am CEST, Brent futures were down 0.59% to $64.06 per barrel, while West Texas Intermediate (WTI) futures fell 0.6% to $60.83 per barrel—both touching their lowest levels in over a week. Crude prices have experienced notable volatility in recent weeks as market participants weigh rising geopolitical tensions against mounting supply from major oil-producing nations. Broader macroeconomic factors—such as easing US-China trade tensions and renewed selling in US Treasuries—have also been influencing oil market movements. Earlier in the week, prices briefly spiked following a CNN report that Israel was preparing to launch strikes against Iran's nuclear facilities, citing intelligence from US sources. However, the rally proved short-lived, with analysts suggesting the warning may have been a strategic move by the US to exert pressure on Iran ahead of the nuclear negotiations. The geopolitical boost was quickly overshadowed on Wednesday by data showing a surge in US crude inventories. According to the Energy Information Administration (EIA), US oil stockpiles rose to 443.2 million barrels in the week ending 16 May—the highest level since July 2024. The report also indicated that net US crude imports had increased for a third consecutive week, while domestic demand remained weaker than expected. News about OPEC+'s potential acceleration in production hike sent the oil price down further on Thursday. The oil production cartel is reportedly considering hiking crude output by 411,000 barrels per day (bpd) in July. The decision is yet to be finalised on 1 June when the group holds the next meeting. The group, which accounts for around 40% of global oil supply, has jointly reduced production by approximately 2.2 million bpd in 2023. The quicker-than-expected phased rollback began with a 135,000 bpd increase in April, tripling to 411,000 bpd in May and June. The acceleration is seen as a punitive measure against members which failed to comply with agreed production quotas, with Kazakhstan and Iraq identified as recent overproducers. Crude prices have consistently fallen following OPEC+ announcements of larger-than-expected production increases in both April and May. However, the potential July decision may already be priced in by markets—unless the group surprises traders with an even more aggressive supply boost. The demand outlook remains fragile amid ongoing concerns over slowing global growth, particularly driven by the US tariffs. Crude prices had previously dropped to a four-year low on 9 April and again on 5 May. The oil market rebounded following the US and China's trade talks earlier this month, when the world's two largest economies reached an agreement to pause high tariffs on each other for 90 days. While near-term pressure remains supply-driven, there is cautious optimism that a sustained recovery in market sentiment, driven by further progress in US tariff negotiations, could support a rebound in oil demand. 'While the immediate pressure comes from the supply side, I believe that in the longer term, further progress on US tariff negotiations with key partners could revive demand and offer more meaningful support for oil,' Dilin Wu, a research strategist at Pepperstone Australia, said. The EU is a 'beacon of stability' when it comes to climate policy on the world stage, said MEP Lídia Pereira on Thursday. Speaking at the Brussels' Economic Forum, the member of the European People's Party (EPP) said that the bloc must not resort to 'dangerous' solutions when tackling the climate crisis. 'If we want to find solutions, we have to find solutions with the moderates,' she said. Pereira was responding to an argument for degrowth, proposed at the forum by Timothée Parrique, an economist and researcher at HEC Lausanne. 'This [degrowth] is not a political statement… this is a scientific reality that we have to grapple with,' Parrique said. 'There is no point being first when you're going in the wrong direction…economic growth has lost all correlation with quality of life.' He continued: 'I can tell you with confidence wealth is not trickling down and pollution is not trickling out.' The theory of degrowth, which has been around since the 1970s, warns against continual economic growth and instead advocates for economic shrinking. Proponents argue that the world doesn't have enough resources to make endless growth a realistic goal, meaning we need to scale back our consumption. Although supported by some eminent academics, critics argue that degrowth would massively destabilise the interconnected global economy, resulting in unemployment and deepening inequality. They also argue that it's a tough political sell. Even so, 'the costs of action are much lower than the cost of inaction,' stressed Parrique on Thursday, noting that growth-focused policies will have a 'huge drawback' in the long term. He suggested that public figures should do more to promote public awareness around this. Lídia Pereira argued that the green transition can go hand in hand with the EU's push to become more competitive. She pointed to subsidies in China and the US, notably former President Biden's Inflation Reduction Act (IRA), and said that Europe must do more to foster 'strategic autonomy in clean technologies'. This is currently held back by a lack of progress on a fully-integrated capital market in the EU, she said. As a result, companies can't get their hands on the capital they need to compete on a global scale. Country-specific laws are still a hindrance to cross-border funding, forcing companies to be more reliant on banks, rather than private investors, for loans. The EU is aiming to be climate neutral by 2050 and member states have specific strategies on how they plan to achieve this. Pereira suggested that Europe could act as a pioneer for other economies when it comes to fulfilling climate commitments, which are becoming ever-more urgent. This comes as, across the Atlantic, the US administration is pulling economic resources from initiatives designed to support the green transition. Donald Trump in January signed an order to withdraw the US from the Paris climate agreement for the second time. The president is also pushing for a renewed focus on fossil fuels, as opposed to renewable technologies, and is rolling back elements of the IRA.
The Hindu
20-05-2025
- Business
- The Hindu
The ongoing oil price tensions
Just when you had your surfeit of headlines screaming of blood and gore, come the drumbeats of a new conflict. However, in this new one, the belligerents do not swap bullets but barrels. Yet, this incipient conflict is shaping to be a 'mother of all battles' perhaps with a more universal impact than the destruction being wrecked in various corners of the world. This prognosis may surprise observers who not only missed the weeks of its run-up skirmishes but also the bugle of war, when on May 3, the Organization of the Petroleum Exporting Countries Plus (OPEC+) decided to go ahead with a collective output increase of 4,11,000 barrels per day (bpd) from next month (June). This was the third month in a row that the oil cartel decided to raise crude production, cumulatively undoing the 9,60,000 bpd or nearly half of the 2.2 million bpd 'voluntary' output cuts eight of its members undertook in 2023, to increase global oil prices in an oversupplied market. There are hints that the full 2.2 million bpd cut would be unwound by October 2025. Though the announced production rise was less than half a per cent of global daily production, the oil market was so jittery that the Brent crude price plummeted by almost 2% to $60.23/barrel, the lowest since the pandemic. It has since recovered to $65/barrel with support from the U.S.-China stopgap trade deal and reports of stalemate in the U.S.-Iran nuclear talks. Saudi's strategy The oil market is still gutted and crude price is nowhere near the triple dollar mark that OPEC+ aimed for. Why, then, has this 23-member producer clique decided to reverse its tactic from reducing supplies to raising production? To find the reasons, we need to deep dive into the oil market of the post-COVID era. Despite the expectation of a quick turnaround, global post-COVID economic recovery was mostly K-shaped leading to an anaemic growth in oil demand. Meanwhile, oil producers were desperate to ramp up their outputs to make up for lost revenue. It also did not help that several new producers, from the Shale oilers to non-OPEC+ countries, such as Brazil and Guyana, also wanted a piece of the shrunken demand. To square the circle, OPEC+ decided to take a collective production cut of five million bpd, nearly 10% of its total pre-pandemic output. When even this move did not shore up the oil price, a further 'voluntary' cut of 2.2 million bpd was taken by eight members. This rope trick also failed to raise oil prices which continued to slide downwards. While these processes were ongoing, Saudi Arabia, OPEC+'s largest producer, which took nearly three million bpd or 40% of the total production cuts, got increasingly infuriated by endemic OPEC+ overproducers, such as Kazakhstan, Iraq, the UAE and Nigeria. The Kingdom, often called a 'swing producer' for its large spare production capacity, prefers stable and moderately high oil prices to ensure a steady oil revenue. However, it has made exceptions in 1985-86, 1998, 2014-16, and 2020 to pursue a market share chasing strategy to punish perceived overproducers. In the past, this market flooding strategy of Saudi enabled Riyadh to eventually impose production discipline among its peers, allowing prices to return to Riyadh's desired levels. Now, when repeated pleas failed to stop overproducers, and when Saudi Arabia's average production fell below nine million bpd in 2024, its lowest level since 2011, Riyadh decided to repeat the playbook: an oil price war in the guise of accelerated restoration of voluntary production cuts. An oversupplied oil market However, many observers are less sanguine about the outcome of the Saudi campaign this time owing to several unique and different fundamentals. To begin with, this time the Saudis do not have the usual deep pockets needed to prevail. The oil market is more fragmented with large flocks of freelancing producers. High Capex has been sunk in ultra-deep offshore fields and other difficult geographies which need recovering, even at marginal costs, to avoid adverse political and economic consequences. Moreover, the crude exports by major oil producers such as Russia, Iran and Venezuela are currently hobbled by U.S. economic sanctions which may not last long. The global oil demand is approaching a plateau and the International Energy Agency (IEA) expects it to grow only by 0.73% in 2025 despite sharply lower prices. The controversial 'peak demand' theory does not appear as outlandish now as it did only two years ago when the IEA predicted that global oil consumption would peak before 2030. The signs in that direction are ubiquitous — from the global economic slowdown to the growing popularity of non-internal combustion engine vehicles, particularly in China, the largest oil importer, and growing climate change mitigation. These pessimistic projections are likely to be further compounded by the huge disruption unleashed by U.S. President Trump's tariff war. The S&P Global agency lowered its global GDP forecasts to 2.2% for 2025 and 2.4% for 2026 — historically weak levels since the 2008-09 recession except for the pandemic period. The World Trade Organization recently predicted a 0.2% annual decline in world trade in 2025 unless other influences intervene. The aforementioned bearish factors can create an inelastic situation causing oil prices to not return to previous levels even after supply-side impetuses are reversed. All this background begets the question: why has Riyadh picked this moment to unleash the oil war? To some observers, the likely rationale lies in a mix of economic and political factors. To begin with, faced with the inevitable long-term prospects of a buyers' market for the foreseeable future, Saudi Arabia may be trying to frontload and maximise their oil revenue. They may also be aiming at positioning themselves at the lower end of the oil price spectrum in anticipation of sanctions being removed from Iran, Russia and Venezuela, three of the biggest producers as well as the full rollout of Mr. Trump's 'Drill, Baby, Drill' campaign. Last, but not least, the move was probably intended as a curtain raiser for President Trump's high-profile state visit to the Kingdom with Al-Saud wishing to be seen as heeding Mr. Trump's call for lower oil prices to help contain U.S. domestic inflation despite his higher import tariffs hurting consumers. With defence guarantees, a nuclear agreement and over $100 billion in American weapon sales lined up, the Saudis have a lot to gain from the U.S. President's successful visit. The impact on India Although the low-intensity oil war may not hit the headlines the way shooting wars do, it is arguably far more consequential. It is particularly true for India, the world's third-largest crude importer, which shelled out $137 billion in 2024-25 for crude. India's crude demand rose by 3.2% or nearly four times the global growth. A U.S. study last year predicted that in 2025, nearly a quarter of global crude consumption growth would come from India. Even further down the line, India's oil demand is widely expected to be the single largest driver for the commodity till 2040. Consequently, although we may not be a combatant in the oil war, we have high stakes, with a one-dollar decline in oil price yielding an annual saving of roughly $1.5 billion. While the downward drift of crude prices in the short run due to the ongoing 'oil war' may be in our interest, the picture is not entirely linear. Lower oil revenue hurts our economic interests in several ways. It causes a general economic decline of oil exporters which are among our largest economic partners, affecting bilateral trade, project exports, inbound investments and tourism. Lower crude prices also affect the value of our refined petroleum exports, often the largest item in our export basket, and could push down refinery margins. Moreover, the lower unit price of oil and gas reduces our pro rata tax revenues. The Gulf economies sustain over nine million of our expatriates, many of whom may lose their jobs. Their annual remittances, estimated at over $50 billion, may suffer, hurting our balance of payments. Irrespective of the outcome of the ongoing oil war, unless we find a new set of drivers to replace hydrocarbons, the lower synergy may become the 'new normal' across the Arabian Sea. Mahesh Sachdev, retired Indian Ambassador, focusses on the Arab world and oil issues. He is currently president of Eco-Diplomacy and Strategies, New Delhi.
