The long losing streak in oil prices over the past two weeks was the result of U.S. policies and soaring American oil production, Ed Morse, head of commodities research at Citigroup, told Bloomberg in an interview.
Relentlessly rising American oil production, coupled with the U.S. granting waivers to eight Iranian oil customers—including Tehran’s biggest clients China and India—added to the oversupply concerns on the market. On the demand side, the U.S.-China trade war has been hurting global economic and oil demand growth prospects, according to Morse.
All these factors combined, along with U.S. President Donald Trump’s latest tweet aimed at OPEC—“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”—were the reasons behind the oil price plunge into a bear market.
“The oversupply in the market is a made-in-America phenomenon,” Morse told Bloomberg. “It’s the unexpected consequences of American policy and the unintended impact of technological changes that made this historically unprecedented arena for production growth blossom,” Citigroup’s head of commodities research said.
The EIA estimates that U.S. crude oil production was 11.6 million bpd in the week to November 2, the highest ever weekly production estimate.
Over the past months, production at the leaders of the OPEC/non-OPEC production cut deal—Saudi Arabia and Russia, respectively—has also increased. Russia, Saudi Arabia, and few Arab Gulf nations with spare capacity have been pumping more since June to offset in advance expected steep losses from Iran once the U.S. sanctions snapped back. Iran’s oil exports did fall, but not as much as analysts and market participants were expecting.
OPEC and Russia’s October production more than offset losses from Iran and Venezuela, while demand in some developing countries has been slowing, the International Energy Agency (IEA) said on Wednesday. Surging supply from the U.S. and OPEC production compensating for Iran and Venezuela point to an oversupply in the market next year, if we assume that OPEC will continue to compensate for its troubled members, the IEA noted.
By Tsvetana Paraskova for Oilprice.com
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