Crude oil traders were in a perplexed situation this week. Some expected crude oil prices to rise following OPEC + ‘s failure to strike a new oil production quota deal, while others believe there will be an increase in oil production. production of OPEC + members, creating an oversupply driving down prices.
The reality is that the spot price of Brent crude oil on the international market rose to $ 80 a barrel before the OPEC + meeting ended on Monday, but fell to $ 75 on Thursday. The price of West Texas Intermediate has risen from a high of $ 77 to $ 72 this week.
Even if speculators are pushing the price up or down today, Energy Information from the Department of Energy points out that the US and global economy is growing and the EIA expects demand for products. tankers increases throughout this year. The uncertainty in the supply-demand equation comes from OPEC + and what will be the production limits of each country without a deal.
âEconomic activity in the United States continues to increase after hitting multi-year lows in the second quarter of 2020,â the EIA said in its energy outlook released this week. âThe increase in economic activity and the mitigation of the COVID-19 pandemic have contributed to the increase in energy consumption. The gross domestic product (GDP) of the United States decreased by 3.5% in 2020 from 2019 levels. This STEO assumes that the US GDP will increase by 7.4% in 2021 and by 5.0% in 2022 . “
The EIA estimates that global consumption will increase by 5.3 million barrels per day (b / d) in 2021, and that global stocks will fall by 0.2 million b / d in the second half of this year.
Goldman Sachs said the world needs an additional 5 million bpd in production to avoid “extremely low inventories.”
In Washington, the Biden administration said it had encouraged OPEC + to strike a deal “that will allow the proposed production increases to go forward.” President Biden issued several orders immediately after his inauguration hampering the development of the oil supply to the United States. The statement encouraging foreign countries to increase production while imposing restrictions on U.S. producers raised the question: does the Biden administration want the oil markets to be run by a cartel instead of those in Texas and Oklahoma? ?
Oil production in the United States has increased significantly from 5.5 million barrels per day in 2010 to 12.8 in January 2020, making it a major player in global oil markets. Just 10 years ago, the United States was a major importer of crude oil with an import / export deficit of 10 million barrels per day. Today, the United States is a net exporter of crude oil and natural gas.
The increase in US production has added to the availability of a secure and reliable energy supply for US consumers.
OPEC + and the US oil industry are competitors. OPEC + has attempted in recent years to regain lost market share for US producers by increasing production, creating oversupply and reducing costs in the hope of depleting âhigh-costâ shale production. Prices started to fall in 2015 and hit bottom in 2020 at the height of the coronavirus pandemic. The strategy has forced many US companies out of business and many more have had to shut down.
The Biden administration needs to understand that the countries participating in OPEC +, which includes Russia, will make their decisions based on what is best for their personal interests and not the consumers in the U.S. Oil producers and gas in the United States is not the enemy. They are the federal government’s partner in meeting the nation’s energy needs.
Alex Mills is the former president of the Texas Alliance of Energy Producers.