After OPEC+, led by Saudi Arabia and Russia, promised to cut production, international oil prices experienced a brief rebound, yet this rebound did not continue. On December 17, oil prices once again fell below the key psychological integer. The West Texas Intermediate for January delivery fell US$ 1.32 per barrel (-2.58%) to settle at US$ 49.88; this is not only the first time in two weeks that it fell below the US$ 50 mark, but also closed below US$ 50 per barrel for the first time since October 9, 2017. Since 2017, international oil prices have been a roller coaster. It is worth noting that after eliminating the influence of the stock market and demand, on the supply side, the determinants of international oil prices are undergoing structural changes.
In recent years, OPEC+ has been the dominant force in determining the trend of international oil prices; however, for now its power is weakening. In particular, Qatar's announcement of its withdrawal from OPEC also confirms that OPEC+ is not strong. Although OPEC+ reached an agreement in December and reduced production by 1.2 million barrels per day from January next year, the market still doubts the actual implementation of this production cuts. Quoting industry source familiar with the details, Reuters said that in the past two weeks in December, Russia's oil output was expected to rise to 11.42 million barrels per day, a record high. According to the data of the Russian Ministry of Finance, even if the country's exports of mixed fuel prices fell to US$ 40 per barrel, Russia's budget can maintain the balance. This also shows that the current oil price may not be enough for Russia to reduce production.
At the same time, the influence of the United States on the trend of international oil prices is increasing. In the process of the formation, development and gradual improvement of the international petroleum system, the United States has undoubtedly played the most important role. Relying on the all-round advantages of politics, economy, and military, the United States effectively dominated and controlled the international oil system for a long time. For instance, the United States, as a leading country, mainly influences oil-consuming countries through the International Energy Agency (IEA), maintains the basic stability of the international oil system by controlling major oil-producing countries such as Saudi Arabia, and threatens or undermines rules through powerful military forces. At the same time, the United States and its allies have been strengthening maritime control to effectively control the world's most important maritime passages, ensuring that during wartime, maritime transportation of certain countries can be blocked, and military operations can be carried out to ensure the implementation of the U.S. military's global strategy.
In addition, the oil-dollar system that has oil as the basis and supported by the U.S. dollar's financial monopoly provides the United States with extremely effective financial support for its strategic interests in the Middle East and the world. To achieve the Middle East oil security strategy, the United States and the Middle East oil-producing countries have built a series of interdependent economic mechanisms, especially the oil-dollar mechanism. On one hand, with U.S. dollar as the main denominated currency of oil trading, the monopoly of the currency as a trading medium can be ensured; on the other hand, the return of the U.S. dollar as an international currency is further strengthened by the inflow of the oil dollar. The United States has opened up financial markets to Middle Eastern oil-producing countries to absorb their huge oil dollar capital. In order to strengthen the inflow of the oil dollar, the United States began a series of financial reforms and financial innovations in the 1970s and established various commodity and financial futures markets. In recent years, a prominent feature of the international oil market is that oil financial is becoming more and more prominent. Financial speculation has caused violent fluctuations in international oil prices, which has caused international oil prices to deviate from supply and demand fundamentals from time to time and even, in turn affect oil supply and demand. Statistics show that the amount of oil dollar circulating in the market is currently several trillion. The United States has consolidated its dominance in the international oil system through the oil-dollar system and the relatively developed financial futures system. However, most of these control methods are based on indirect control. The United States now has a more direct weapon in its hands, and that is the right to produce oil.
On the day when Donald Trump assumed the presidency of the United States in 2017, the White House's website listed the six primary issues that the Trump administration would prioritize. The first is the America First Energy Plan which clearly states that the U.S. policy is to "lower costs for hardworking Americans and maximize the use of American resources, freeing us from dependence on foreign oil" and to "embrace the shale oil and gas revolution". According to data released by the U.S. Energy Information Administration (EIA), the average daily production of crude oil in the United States in 2018 is expected to reach a record 10.88 million barrels, which means that the United States is the world's largest oil producer and is expected to set a new record for the United States. According to U.S. media, the United States has become a net exporter of oil, breaking the past reliance on imported oil for nearly 75 years. In the latest report, the EIA predicted that the average daily output of crude oil in the United States in 2019 is expected to rise further to 12.06 million barrels. Over the past decade, the U.S. oil output has more than doubled, indicating that the rise of the U.S. shale oil has changed the global energy landscape. The United States has become the world's largest oil producer and will change the formation mechanism of international oil prices to form a new pattern of the international energy market.
Unlike the United States' previous involvement in controlling international oil prices through indirect means, it can now directly control international oil prices by controlling oil production. If before this the international oil price was being jointly controlled, then it may be controlled by one single side in the future. With strong political, economic and military strength, and as the world's largest oil-producing country, the United States can directly control the rise and fall of oil prices. In this way, for the global oil supply side, what price the oil will sell in the future depends on the U.S. As President Trump came to power, he has been asserting that there is no need for high oil prices. Whenever OPEC and Russia discuss the reduction of production, Trump imposes pressure that OPEC would maintain the current oil flow without limit it. The world does not want to see or need higher oil prices. When facing the world's major oil-consuming countries and its major competitors, the United States can also impose restrictions on these countries by raising international oil prices in the future. This also means that the United States has one more "weapon" to regulate the global oil market.
Final analysis conclusion:
Becoming the world's largest oil producer and has significantly reduced the reliance of the United States on the international oil market, which will in turn dramatically change the global oil market. By regulating domestic oil production, the United States can control international oil prices more directly according to its own wishes.
