Has The U.S. Cracked The OPEC Cartel?

Prices and production

It’s not easy to decide oil strategy in the current climate. Fresh reports over the weekend suggested that OPEC+ delegates were considering a delay in restoring output, before they were denied by major producer Russia. While OPEC+ members meet monthly to set quotas for crude production, there will be more on the table next time around with oil (CL1:COM) recently giving up all its gains seen since the beginning of the year.

Crude reality: A promise by President Trump to “drill, baby, drill” will continue to see America produce more crude than any country on record, while the threat of tariffs on global growth has also weighed on prices. It’s despite new sanctions on nations like Iran and commitments by the U.S. to cut the oil exports of the Islamic Republic. Meanwhile, many big countries like China and India are still getting their crude from shadow fleets, and members within OPEC+ have pumped more than their official quotas in a test that can challenge the cartel’s unity.

OPEC+ is currently cutting 5.85M barrels per day, which is about 5.7% of global supply, and in December, the group extended its latest cuts through the first quarter of 2025. It marked the latest delay due to weaker demand and increasing outside supply, but some members are getting antsy, like the United Arab Emirates. It feels that it has done more of the heavy lifting amid a campaign for higher quotas, and any new delays could be met with resistance.

SA commentary: “There’s a lot of spare capacity that can be deployed into this market,” TD Wealth writes in Will Trump’s Calls For OPEC To Lower Oil Prices Work? “I think OPEC doesn’t really want to do that because they know a 10%, let’s say, increase in supply would cause more than a percent reduction in price. And that would not necessarily be accretive for the revenue side for them. So, I think they’re going to play it by ear, see how things go, and keep the market as balanced as they possibly can.”