(Oil Price)– OPEC+ yesterday agreed to yet another monthly boost in production, this time for a modest 137,000 barrels daily. Oil prices inched up, yet they remain tightly range-bound, with Brent at just over $65 per barrel following the news. On the one hand, this is good news for consumer countries—including the U.S. On the other hand, it’s bad news for producer countries—including, again, the U.S.
The Wall Street Journal called Saudi Arabia’s strategy of leading the production cut unwinding a gift to President Trump. It would keep prices at the pump low, the publication said, and cushion the blow from tariffs. It would also hurt Russian energy export revenues, making Trump’s job in mediating an end to the war in Ukraine easier, the argument went.
In some respects, the Saudi-led return to production growth in OPEC+ has indeed been positive for the U.S. with regard to retail fuel prices. The national average per AAA stood at $3.133 per gallon on Sunday. That’s down on the year, but, in all honesty, not much: a year ago, a gallon of fuel cost an average of $3.176. This is only a snapshot of gas prices in the United States, and it does not make much sense as an informative piece of data given state-based price differences stemming from taxation. California comes to mind as the place with the highest gas prices, regardless of OPEC+ policy.
At the same time, lower oil prices have caused worry in the shale patch. This may or may not have been among the goals of the Saudis and their OPEC+ partners when they made the decision to start unwinding those cuts agreed in 2022. Most media reports on the topic point to OPEC trying to win back market share from the U.S., Guyana, and Brazil.
However, there is more to this story than barrels from Brazil, the U.S., and Guyana, simply replacing barrels from Saudi Arabia and Iraq. For starters, take U.S. oil exports to China. Those plunged by almost 50% last year—before Trump started slapping tariffs left and right. The tariffs, of course, did not help. So U.S. oil had to be redirected to Europe.
Incidentally, Guyanese crude is also going to Europe, so Guyana and the U.S. are effectively as much of a pair of rivals as the U.S. and Saudi—except Guyana’s total production currently stands at less than 700,000 barrels daily. That’s hardly a real rival to either the U.S. or Saudi Arabia. Brazil, meanwhile, is indeed boosting its own crude oil exports—and a lot of these are going to China.
