OPEC "The US Must Also Join Production Cuts"...Oil War Round 2 (Comprehensive)

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Member countries of the Organization of the Petroleum Exporting Countries (OPEC) have publicly demanded production cuts from the United States. Although OPEC discussed production cuts last month, it never directly mentioned the U.S. It appears that the second round of the oil war between Saudi Arabia and Russia, with the U.S. caught in the middle, is coming into view. International oil prices, which showed a brief rise late last week, fell again amid skepticism about the postponement of the OPEC meeting and the possibility of a production cut agreement.

According to foreign media including Bloomberg on the 5th (local time), Samer Al-Kaabi, Iraq's Oil Minister, issued a statement that day asserting, "A new production cut agreement should include not only OPEC+ (OPEC and an alliance of 10 major oil-producing countries) members but also major oil producers such as the United States, Canada, and Norway." Suhail Al Mazrouei, UAE Energy Minister, also emphasized on the same day that "a unified production cut effort by all oil-producing countries, including OPEC+, is necessary."

It is unusual for OPEC member countries Iraq and the UAE, which maintain close ties with the U.S., to call on the U.S. to join in oil production cuts. These countries have been reluctant to demand production cuts from the U.S., which supports them militarily as an ally. CNBC, citing sources within OPEC, reported, "The negotiation atmosphere between Russia and Saudi Arabia remains positive, but the problem is the U.S.," adding, "Saudi Arabia and Russia believe the U.S. should also play a part in the production cut agreement." There is growing dissatisfaction within OPEC and Russia that while they are entering into production cut agreements, the U.S., the world's largest oil producer, has no production cut obligations. In particular, voices within OPEC are increasing that the U.S. must participate in production cuts for the negotiations between Saudi Arabia and Russia to progress.

The U.S. has not issued an official response to this. However, last week, after meeting with CEOs of the U.S. oil industry, President Donald Trump stated, "The oil market is a free market, and production levels should be resolved by the market," expressing a negative stance on production cuts. He also hinted at the possibility of imposing tariffs on oil imports, signaling his intention to protect the domestic oil industry.

International oil prices are again showing a sharp decline. On the 6th, May delivery West Texas Intermediate (WTI) crude oil futures opened at $25.98 per barrel, down $2.36 (8.33%) from the previous day. Brent crude futures also started trading at $31.63, down $3.20 (9.18%) from the previous day.

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