The latest record of crude oil production in the United States came as a shock to rising oil prices and OPEC. Producers are trying to raise the high benchmark by applying deeper reductions and production.
Last week, the EIA reported that average daily production in September remained unchanged from August when it hit a record high of 13.24 million barrels despite cost inflation and low international oil prices.
This alarming situation is similar to what happened in 2014-2016 when oil prices fell by 70%. At the time, OPEC led by Saudi Arabia fought back against US shale by increasing oil production and drowning as many US producers as possible.
This time, however, US crude oil producers are seen as more united and stronger against the price war. Saudi Arabia and its allies are likely to reduce their risk compared to what they did in 2014 as surrounding countries took austerity measures.
An analyst suggested that Saudi Arabia implement large-scale crude oil production even though it would pose a risk to the OPEC group. Indirectly, this will again sink the US crude oil producers from continuing to power.
However, the oil market is still holding on to lower prices if there is a shortage of physical crude oil globally. Record US production may affect the price benchmark but it does not mean it will be able to fully replace Saudi Arabia and OPEC crude output.
Brazil, which was rumored to join OPEC recently, will not be a full member and will not participate in the production cuts. OPEC should seek greater influence in the global oil market through expansion among non-US producers.
