The OPEC’s (Organization of the Petroleum Exporting Countries) influence, the resource cartel of oil exporters, is declining.
The Wall Street Journal (WSJ) reported on the 7th (local time) that OPEC’s influence on energy prices is shaking due to U.S. crude oil production, which has risen to an all-time high.
OPEC Plus, a consultative body of major non-OPEC oil-producing countries such as OPEC and Russia, agreed to cut 2 million barrels in October last year, and some member countries decided to cut an additional 1.66 million barrels in April.
Saudi Arabia then voluntarily began cutting production by an additional 1 million barrels starting this month.
As a result, OPEC’s crude oil production this year is expected to decrease by 6% compared to last year. However, despite such supply cuts, crude oil prices fell by 13%.
The WSJ analyzed that this phenomenon was caused by the expansion of supply in the United States along with the demand cause of the slowdown in the Chinese economy.
U.S. crude oil production increased 9% in the first four months of this year compared to the same period last year.
In addition, the increase in crude oil production in non-OPEC oil-producing countries such as Brazil, Canada, and Norway as well as the United States contributed to the expansion of supply.
According to Ristad Energy, an energy industry information analysis company, the amount of additional crude oil produced by the U.S. and others is two-thirds of OPEC’s total production cuts.
Experts predict that the U.S. influence in the international energy market will increase further.
This is because the efficiency of shale crude oil extracted from sedimentary rocks has increased, allowing production to be increased at a lower cost than before.
Shale crude oil had the disadvantage of being expensive to produce, such as having to work deeper than ordinary crude oil and gas, but recent technological advances have made it possible to reduce costs.
As a result, the U.S. shale oil production industry explains that even if energy prices fall from now, it can afford to produce crude oil without worrying about profitability.
In the case of U.S. energy company EOG, it is said to have improved efficiency enough to make profits even if crude oil prices fall to $42 per barrel.