If oil prices are higher, then why isn't the US producing more?
It's World Business Express from the BBC World Service.
I'm Liana Byrne.
How is China's media taking the news that the US might postpone their trade talks and how gas shortages in India are hitting the biryani sellers in Kolkata.
The escalation in the Middle East continues to push up energy prices, while the Strait of Hormuz, the choke point for all shipping in and out of the Persian Gulf, remains effectively shut.
With me now with the latest is Fiona Sincotta, Senior Market Analyst at Citi Index.
Fiona, where are the oil and gas prices at now?
Yes.
So, oil prices are still hovering around that $100 a barrel level.
That's Brent.
It's up around 2% today.
Still up over 40% since the start of the conflict.
And that's basically amid supply worries with the straight to foremost still effectively closed.
And then energy, we're still looking at a 60% gain. across the month so far.
Interestingly Fiona there's been a wider market recovery hasn't there Ben?
Yeah, this is really interesting.
So, US stocks have actually opened higher today.
They're adding to 1% gains yesterday, still down around 2% since the outbreak of the conflict.
But that's really not that much.
But I think it's important to then consider regions, because Europe and Asia, for example, are more vulnerable to imported energy prices.
European stocks are still around 6% lower since the start of the conflict.
All right, Fiona Sincotta, always a pleasure.
Thanks so much for joining us.
So with the increase in oil price, you'd think the production could also increase.
But in the US the number of rigs is below last year's levels and investment in new drilling is expected to stay modest in 2026.
Osama Rizvi, global market and product strategist at Primary Vision, says it's not as straightforward as we might think.
So there seems to be a pattern.
Back in 2022, when there was a conflict between Russia and Ukraine, then it broke out.
We did see that the FRAC spread count that we use as a proxy of where the US shale production is headed.
It increased 16 for the next 90 days.
But in 2023 October, when the conflict between Israel and Palestine started, we only saw a short spike of 6.
In 2024, oil prices rose from 65 to 85.
Yet there was no response in FSC in the FRAC spread count.
So what does it all mean?
I think there are two key takeaways.
The first one is that if prices remain higher for longer, and which in this case is more than three months, we will see some sort of more drilling activity from the US operators.
And, on the other hand, There might be a chance that the link between both are not as strong as we speak right now, because the efficiency what we call the frack utilization rate it has really spiked up.
So back in 2023, it was 0.70.
Now he's at 1.30, which means that no frat job is sitting idle.
Each and every job is producing results.
So that is where we stand at the moment.
So it's efficiency versus the outlook that how long these prices will stay higher.
It's not the level of oil prices, but it's the volatility.
Companies simply sometimes don't trust those spikes, perhaps.
Indeed, because we have literally witnessed one of the most and wildest swings in oil prices recently right.
30 bucks up, 30 bucks down.
So in this volatile situation, I don't think anyone is going to take any decision related to CapEx or OPEX or anything like that.
We will get more direction once things stabilize.
And this stability may also mean that we enter once again an era where oil prices will stay high for longer.
If that happens, I do expect that we will see an upward movement in both the FSC and FGC, which means more drilling activity.
But despite not having this increase in rigs and rig counts and frag job counts, we are still seeing that US shale production is touching new highs, which once again reinforces the thesis of efficiency gains.
How long that will last, that is another question.
That was Osama Rizvi from Primary Vision.
Now, while the US is grappling with the fallout from the Iran conflict and rising oil prices, US President Donald Trump is weighing up whether to delay a crucial summit with Xi Jinping at the end of the month.
On Sunday, President Trump told the Financial Times he might postpone the meeting if China did not help unblock the Strait of Hormuz.
But on Monday he said he had proposed the delay solely to make sure he was around to manage the war.
So how is this being framed inside China?
Here's the BBC's China media analyst, Kerry Allen.
Well, China's definitely giving the impression that the visit from Trump is still going to go ahead, but they're not really talking about when the timing of this may happen.
So today China's foreign ministry spokesman has said that China and the US are maintaining communication on issues such as the timing of Trump's visit to China.
I do think though, that China does like to give a lot of pomp and circumstance, put on a big show for the US president, for any government official, when they come over.
So there will be frustration if the meeting between Trump and Xi does get pushed back.
But as to the idea of whether the meeting might be delayed due to navigation in the Strait of Hormuz, state media are saying in China that they feel that the US is trying to shift responsibility from the conflict in the Middle East and try and kind of bring Beijing into it.
So they're quite critical of this idea.
They're saying that this was meant to be a friendly chat between Xi and Trump and it's almost being politicised.
That's the way media are seeing it.
That is interesting, because China relies heavily on oil coming through the Strait of Hormuz, doesn't it?
Is that being emphasised in domestic coverage?
Over the last week, state media have really been saying that the blockade in the Strait of Hormuz is having a huge impact on many different countries.
China has seen its petrol prices go up for the first time in four years.
It has acknowledged that China has been impacted.
But what Chinese media like to do is say China is going to be less impacted than other nations.
So they're really talking about how China's thought about things in the long term.
It's put plans in place.
It's got reserves.
And what state media newspapers like the Global Times have been doing is they've been saying that the US, in contrast, has really shot itself in the foot.
There's been retaliation protests in America over this war happening in the first place, that the US and Israel are on different pages, that the idea that Israel is behind the blockade and the US didn't want this to happen.
So really kind of trying to suggest that the US didn't anticipate that things would reach this state.
So they're trying to really bring up the idea that the US is thinking oh, I shouldn't have done that now.
That's how media are really trying to paint the US.
Kerry Allen there.
The AI firm Anthropic is hiring an expert in chemical weapons and high explosives to join its policy team.
The company says their job will be to guarantee that its AI tools cannot be used to generate recipes for these kinds of weapons.
The rival firm, OpenAI, is also recruiting an expert in chemical and biological risks.
But some experts say nobody should be feeding the company's AI models with this kind of information without oversight from regulators.
Now higher oil prices have already been taking its toll on businesses around the world.
The Indian dish biryani is one of Kolkata's most famous dishes and a good money spinner for restaurants in the city.
Slow cooked for hours, it's energy intensive and at the moment gas shortages are a huge challenge.
We heard from some biryani sellers in Kolkata.
Our work is with commercial gas cylinders and, due to the ongoing scarcity, we just can't find any commercial cylinders right now.
So for now we have to stay shut indefinitely.
It's Ramadan at the moment, so there's less demand, but it will shoot up during Eid and at that time we just won't have enough gas to meet demand.
Since our restaurant is known for its biryani, you cannot stop serving that by any means.
There are several people who work in this restaurant and their livelihood is dependent on this, so we don't want our restaurant to shut down completely.
The market will be booming in the coming days for Eid.
If we cannot procure gas cylinders in time, we'll lose out on that market completely.
We work with commercial cylinders, so we need two a week.
Now I cannot find even one.
There's a beautiful bazaar here during Eid.
If the gas supply issue doesn't get resolved before then, all the shops here will shut down.
And with biryani sellers in Kolkata speaking to the BBC.
And that is it from World Business Express from the BBC World Service.
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I'm Leanna Byrne.
Have a great day and thanks so much for listening.
