Over the weekend, OPEC+ production was raised of 548,000 barrels per day (bpd) for August, above the initial projection of 411,000 bpd. With the goal of regaining market share and stabilizing prices, this action quickens the rollback of the voluntary supply reduction in 2023.
Even with this rise, OPEC+’s spare capacity is still projected to be close to multi-year highs, above 5.6 million barrels per day.
This is the oil market we’re talking about, so we cannot ignore geopolitics.
The 12-day confrontation with Israel in June 2025 caused Iran’s oil exports to plummet by over 94%, costing the country an estimated $1.4 billion in lost revenue. The long-term prospects for recovery, however, seem cautiously hopeful.
Iran has taken action to increase its oil exports since the war. Tanker operations have restarted, and storage tanks on Kharg Island are refilling, according to satellite imagery, indicating a deliberate attempt to increase exports. Furthermore, Iran still uses a network of tankers to get around sanctions.
The US is pressuring Iran with oil sanctions, but China is used to this, so I do not expect it to get much in the way. Given that China takes most of the oil, we’ll probably see production return to 2m/b per day pretty quickly.
OPEC+ is ensuring there’s no price spike in the meantime, consolidating its relationship with the US while undermining its oil patch.
This is not a bad deal for the southern Sunni states that have long feared Iranian nuclear hegemony.
Oil outlook still looks benign in 2025 and is the primary tariff inflation killer.
It will also whack Aussie contract export prices of LNG, which are priced via a percentage of the oil price.
This will hurt export revenue but boost the local economy to the extent that it weighs on the local price of gas and, therefore, power.
Though it must be remembered that it is the spot price of gas that matters for electricity.
As for yesterday, the new energy shock continued.
And if you’re wondering why your power bill is roaring higher again right now, then it is because state governments have been quietly rolling back their subsidies, with a lot more to go right through H1,26 as the federal rebates are cancelled as well.
Then we’ll head into the next leg higher as Labor’s gas crooks can’t get reservation right.
There is no end in sight to the energy superidiot.
