Limited Impact Expected on International Oil Prices Even with OPEC+ Production Increases… Government Faces Dilemma Over Adjusting the Price Cap
Even with OPEC+ production increases, the decline in international oil prices is expected to be limited Tensions in the Strait of Hormuz and export disruptions are supporting oil prices, adding to Korea’s policy burden
Although OPEC+ oilproducing countries have decided to increase crude oil production starting in June, the market is seeing speculation that this decision will have difficulty significantly lowering international oil prices. The analysis is that the actual effect of expanding supply may be limited as tensions surrounding the Strait of Hormuz coincide with export disruptions in some oilproducing countries.
Seven countries are taking part in this increase in production: Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman. However, since Iraq and Kuwait are effectively in a situation where export conditions are blocked, it is said that the planned increase of 188,000 barrels per day is unlikely to lead to a decline in oil prices.
This situation is also adding pressure to the Korean government’s operation of the oil price cap system. The government sees international oil prices as a key variable for adjusting the standard, but as oil prices are not easing easily, concerns are growing over whether to raise the standard. At the same time, losses in the refining industry due to the prolonged system are also accumulating, so discussions on the next measure are expected to continue.