Russia, the biggest oil producer, clearly stated last week that an oil price of $70 per barrel is satisfactory. With this, rest of the oil producers feel better and will take prompt actions on their part to reduce their production in order to bring the oil prices to a comfortable level. Regardless of the forthcoming OPEC meeting next month, the outcome is clear. Saudi Arabia, the biggest exporter, announced ahead of time of cuts of up to 500,000 barrels from its exports next month.
Kuwait and the United Arab Emirates will be second in line to reduce their production, and others will follow to bring the price back to $70 and slightly above. As soon as the American administration announced its waiver and allowed Iran to export to eight different countries, oil prices began to collapse. To be frank, USA has disappointed the producers, as it changed its tough stance of zero oil export from Iran to almost 1.7 million barrels per day.
This really killed the oil markets and the trust in the US policy. After demanding a firm stand and commitment by all oil producers, it went full blast to waivers and exceptions. No wonder the oil prices collapsed especially with the oil storages everywhere filled with oil. As if this was not enough, the USA shale oil production has leaped and reached the highest level, with expectations to reach 12.1 million barrels by end of next year. The increase in USA oil production came as a surprise.
The speed in USA oil production has surpassed everyone and is making OPEC face long sleepless nights as it is unsure about what to do next except watch in misery and further reduce oil production. Meanwhile, the US administration is still pushing for more production by all. OPEC and Russia are closely watching the oil prices and making sure it does not fall below $70 at any time. They will do anything to keep the prices at that level, no matter how loud the US president shouts or tweets. Saudi Arabia and Russia had agreed to increase based on zero Iranian production but the US president waived off the decision, and the rest followed. Oil prices have collapsed. The game is over.
