July 5, 2019
By Alex Mills
World oil markets have flipped upside down with the main exporters of oil making concessions to the new kid on the bloc: independent producers of oil from shale in the United States.
Evidence of this dramatic turnaround appeared in December 2016 when the 14 members of the Organization of Petroleum Exporting Countries decided they must cut their production to offset an oversupply of oil on the international Brent market causing prices to decline from near $100 per barrel in 2014 to $40.
Saudi Arabia, the world’s largest exporter at the time, even went to Russia, which produced as much oil as the Saudis, and negotiated an agreement that Russia would participate in reducing its production, too.
The new arrangement was loosely called OPEC+.
Meanwhile, oil production in the U.S. surged from just 5 million barrels per day (b/d) in 2007 to 12 million b/d today. The additional production reduced the need for so much imported oil in the U.S., and it added to the surplus of oil on the international markets.
The reduction in production by OPEC+ – set at 800,000 b/d from OPEC members and 400,000 b/d from Russia and other non-OPEC countries – did ease the oversupply, and prices slowly increased….