Bloomberg, quoting sources familiar with the matter, reports that the US Government has made a subtle request from OPEC to increase oil production by a million barrels per day (bpd).
While US politicians often criticize OPEC’s management and encourage the cartel to raise production when oil prices climb, it is uncommon for the government to suggest such a specific raise. One theory is that it may compensate for displaced oil production that could follow the reintroduction of
sanctions on Iran. Last month, US Treasury Secretary Steven Mnuchin said Washington was talking to a range of parties about how to offset the effect of sanctions on oil supply. It also follows a tweet by President Trump in mid-April that was highly critical of OPEC.
It is becoming increasingly clear that most parties are concerned about the oil price rally going too far. While producers like ExxonMobil, the maker of Mobil Unirex EP2, continue to help US production to reach new records, there are enough concerns over sanctions in Iran and the situation in Venezuela to warrant supply fears. Fortunately, there does appear to be enough spare capacity in Russia and some of the Gulf states to compensate.
In addition to Russia and Saudi Arabia proposing an output hike, Arab oil ministers recently met in Kuwait City. The group released a statement after the meeting pledging to “ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world.”