India, Japan, South Korea will be ‘most hit’ if oil prices reach $100

The surprise output cut by OPEC and its allies sent oil prices rallying — and analysts say major oil importers like India, Japan and South Korea will feel the most pain if prices hit $100 per barrel, as some have predicted.

On Sunday, OPEC+ announced a production cut of 1.16 million barrels per day, in a move that oil markets were not expecting.

“It’s a tax on every oil importing economy,” said Pavel Molchanov, managing director of private investment bank Raymond James.

“It’s not the US that would feel the most pain from $100 oil, it would be the countries that have no domestic petroleum resources: Japan, India, Germany, France … to name some of the big examples,” Molchanov said.

The voluntary cuts by countries in the oil cartel are set to start in May and last till the end of 2023. Both Saudi Arabia and Russia will trim oil production by 500,000 barrels per day until the end of this year, while other OPEC members like Kuwait, Oman, Iraq, Algeria and Kazakhstan also reduce output.

Brent crude futures were last trading 0.57% higher at $85.41 a barrel, while the U.S. West Texas Intermediate futures stood 0.5% at $81.11 per barrel.

Oil is the most significant energy source in Japan, and accounts for around 40% of its total energy supply.

“Having no notable domestic production, Japan is heavily dependent on crude oil imports, with between 80% to 90% coming from the Middle East region,” the International Energy Agency said.

South Korea

Likewise for South Korea, oil makes up the main bulk of its energy needs, according to independent research company Enerdata.

“South Korea and Italy are more than 75% dependent on imported oil,” Molchanov pointed out. 

Europe and China are also “highly exposed,” according to Gloystein.

However, he added that China’s exposure was slightly less due to domestic oil production, while Europe as a whole relies mainly on nuclear, coal and natural gas rather than fossil fuel in their primary energy mix.