It is no longer OPEC and OPECplus countries that are to manage the oil prices, but USA too as it has the highest strategic oil reserve of above 700 million barrels and the highest oil production at 12.2 million barrels which can go up further despite its high production cost per barrel compared to OPEC-plus countries.
There are indications that USA could use its strategic reserve for the obvious reasons – either due to the costs incurred while enjoying its own oil production, or most likely for forcing down the oil prices and preventing it from hitting the magic number of $70.
In both scenarios, the American administration is adamant about managing the oil prices and supplying on its own, overtaking the role of OPEC and bringing it back to origin – the hands of American oil companies. Even though OPEC members enjoy the lowest costing crude oil – below $7 per barrel, they still cannot compete with this newly discovered shale oil which is taking over the production away from other oil producing countries.
It is also forcing major international oil companies to keep their investments in America and refrain from investing overseas particularly in the Middle East for the time being. Recent USA reference or hint to reduce its strategic reserve is a sign to OPEC-plus to increase its oil production in anticipation of disallowing further relaxation of the oil embargo on Iran. At the same time, it is keeping tight control on Venezuelan export to less than one million barrels per day.
Now USA has found its own independent avenue to manage oil prices by simply releasing part of its strategic reserve in order to force oil prices to go below $65, should it desire to do so prior to the presidential elections in 2020, and keep domestic gasoline prices down and within its control instead of in the hands of outsiders.
In less than 50 years, USA has become oil independent without the need to import foreign oils. With the USA managing the oil prices, OPEC and its new partners are becoming less effective in the oil markets. Now President Trump’s tweet is becoming direct price setter in town, not OPEC anymore.
By Kamel Al-Harami Independent Oil Analyst
email: naftikuwaiti@yahoo. com