The U.S. government has unofficially asked Saudi Arabia and some other OPEC members to raise oil supply by about 1 million barrels per day (bpd), Bloomberg reported on June 5, citing industry sources familiar with the matter.
The rare and direct request came after U.S. retail oil prices hit a record high in more than three years and the country’s eye-catching president publicly complained on social media about OPEC policy and climbing oil prices.
“Looks like OPEC is at it again,” Trump wrote in a mid-April post on Twitter. “Oil prices are artificially Very High! No good and will not be accepted!”
Notably, the request also follows the reimposition of sanctions on Iran’s oil exports by the US, which had previously displaced about 1 million bpd from global markets.
Raising supply was said to have been debated at a meeting of some OPEC member country’s representatives in Kuwait over the weekend. After the meeting was published a statement pledging to “ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world.” Last month, Saudi Arabia and Russia proposed a schedule to gradually boost oil output, which, however, has yet to be agreed by other members of the group.
Benchmark Brent oil futures slid 2 percent to $73.81 a barrel in London trading in the wake of the reported U.S. request.
The government declined to disclose more details about the request, but a spokesperson for the U.S. National Security Council said access to affordable and reliable energy shores up global economic growth and the national security, adding that the United States welcome any market-based action that increases energy access and fosters a healthy global economy.”
U.S. Treasury Secretary Steven Mnuchin said last month that some countries were willing to increase oil output to make up the insufficiency in the global market, just on the day that the U.S. President Donald Trump announced to “withdraw” from the Iran nuclear deal and re-impose sanctions on Iran.
Although no more specifics were provided, Saudi Arabia, Russia, the United Arab Emirates and Kuwait are believed to be the only four countries who hold enough spare production capacity to offset the impact of U.S. sanctions on Iran.
Current oil production is curbed by a deal formed in late 2016 between OPEC and a group of non-OPEC countries such as Mexico, Kazakhstan and Russia which cut oil output by a total of 1.8 million bpd in an effort to boost oil prices, causing the global benchmark, Brent Crude, to rise from less than $45 a barrel to $80 a barrel since the deal was signed.
The deal has removed more crude supplies than originally desired from the market because of the unexpected collapse of the Venezuelan oil industry. With oil inventories in developed countries down to their five-year average and oil prices getting unacceptably high for consumers, producers are discussing easing some of the cutbacks.
OPEC and its allies will discuss their production policy and make a final decision at meetings scheduled on June 22 and 23 in Vienna, in response to the “anxiety” of consuming countries about high oil prices.