U.S. Undersecretary of State for Economic Affairs, Energy and the Environment Jose Fernandez said Monday that the United States wants to see oil production increase, including from the Organization of Petroleum Exporting Countries (Opec). He said oil demand will increase as the world’s economies recover from the coronavirus pandemic. The United States would like to see supply match demand and thus would like to see an increase in global crude oil production, including from Opec+.
The role of Opec+
Opec+ decided in early October to reduce its production by two million barrels per day and has not changed this level since. However, the United States wants Opec+ to increase its production to meet the growing demand. Opec crude production, as estimated by Reuters, was nearly two million barrels per day lower in February 2023 than in February 2019.
A growing demand for oil
President Joe Biden’s administration has dipped into the U.S. Strategic Reserves (SPR) by nearly 250 million barrels between the beginning of September 2021 and the beginning of January 2023, put on sale in the market, to relieve the prices. This shows the willingness of the US to keep prices stable while meeting a growing demand for oil.
Growth prospects
Opec forecasts demand growth of 2.32 million barrels per day in 2023 compared to last year. The price of a barrel of West Texas Intermediate (WTI), the benchmark U.S. variety, is now about a third lower than it was a year ago, in the early days of the Russian invasion of Ukraine. But it is more than 40% higher than during 2019 at the same time, and nearly 30% higher than in 2018.
A question of time
The United States has made clear its desire to see an increase in oil production to meet growing demand. It remains to be seen whether Opec+ will be able to respond in the coming months. Oil prices are expected to continue to fluctuate based on producer decisions and global economic conditions.
