The new world oil order requires careful management

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It is hard to remember at a time when the United States held more power in the global oil markets. America has reversed its markets by becoming the World's largest producer and exporter of crude oil and refined products. But America's geopolitical influence far exceeds its role as an abundant, affordable and secure source of energy.

The United States remains the biggest oil consumeralso, even if China exceeds it in imports and growth rate of demand. In the meantime, President Donald Trump has used his foreign policy to increase America's influence in the oil markets.

Trump has demonstrated that he can move the oil markets with a few characters on Twitter. Under the Trump administration, the The United States imposed tough sanctions on oil exports from two unruly members of OPEC, Iran and Venezuela, movements that have radically changed the global offer.

These measures – combined with a supply-cutting agreement in force under the aegis of OPEC – are why oil prices soared to about $ 72 a barrel, against less than $ 50 end December. But the president did not exercise random sanctions. Before exerting "maximum pressure" on Iran and reducing the country's oil exports to zero, Trump secured badurances from Saudi Arabia, the main leader of OPEC, and some of its Gulf neighbors that they would compensate the lost Iranian casks..

The net effect was detrimental to both Iran and Venezuela while leaving room for growth in US exports. Saudi compliance has prevented oil prices from skyrocketing, making it a winning strategy for Trump.

It remains to be seen whether the Trump administration can maintain this delicate balance. Much depends on the relations of the administration, not only with Saudi Arabia, but also with Russia.

Political and economic interests do not always align, but it is undeniable that the real power in the oil markets is now shared between Washington, Riyadh and Moscow. Vienna – the headquarters of OPEC – is only a cosmopolitan context.

President Trump, Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin are now calling, to a large extent, the blows on the world oil markets. America, Saudi Arabia and Russia produce about 32 million barrels a day, about one-third of the 100 million barrels produced each day worldwide.

The fact that so much power rests in the hands of three leaders with a strong man's reputation means that things could change quickly. Saudi Arabia and Russia have been working to support oil prices since the end of 2016 through a coordinated reduction in supply, a policy that has benefited American producers with a new market share.

Even before the United States is tightening sanctions against Venezuela and Iran – both allies of Russia – Moscow suggested that it was not necessary to extend the supply reduction agreement of 1.2 million barrels per day with Saudi Arabia and the rest of l & # 39; OPEC beyond its expiration on June 30.

Now that Washington has dropped the hammer on Venezuela and Iran – without further renouncing sanctions for Iranian oil buyers as of May 2 – expect Moscow to insist that cuts to OPEC be canceled. The Russian authorities have not hesitated to hesitate to sacrifice market shares to US producers.

This point of view, however, does not correspond to Saudi Arabia's perspective. Saudi energy minister Khalid al-Falih said that his country's badurances to the United States did not mean that Saudi Arabia would break OPEC's deal and flood the oil market. In fact, al-Falih said that there was the opportunity to extend the agreement in the second half of this year.

The economic interest of Saudi Arabia is simple: it is estimated that the kingdom needs an oil price of $ 75 per barrel to balance its budget.

For the moment, it seems that Saudi Arabia can do everything for everyone. Although Trump wants to reduce Iranian exports to zero, compared to its current rate of about 1 million barrels a day, it is more likely that they reach a floor of 500,000 barrels a day since some Iran's biggest customers, including China and Turkey, have promised to continue doing business with the Red Nation.

Because Saudi Arabia pumps much less than its quota of 10.3 million barrels per day set by OPEC, Riyadh can make up for the 500,000 barrels lost per day while remaining in compliance with the supply reduction agreement.

This logic has hitherto kept Oil price in check. In the future, many problems could eventually convince one of the most reckless leaders of the New World Oil Order to step out of the ranks.

Could Russia's desire for US production prevail over its own economic need to drive up oil prices? How will Moscow's support for Caracas and Tehran be taken into account in oil policy decisions when Trump plans to change regimes in both countries?

How can Saudi Arabia maintain cooperation in managing world oil markets with Russia as it continues to reconcile with Trump?

And President Trump is facing his own challenges, especially his re-election in 2020. The Saudis are leading and Putin is not facing the same risk and can afford to play the game long if necessary.

Trump must also keep an increasingly anti-Saudi Congress – still angry at the journalist's badbadination Jamal Khashoggi – in check mitigating the progress of anti-cartel legislation "NOPEC" and efforts to end the war in Saudi Arabia in Yemen. New potential US sanctions against Russia's energy sector presented Congress add to the political risk for Trump.

In the meantime, all eyes are on the price of oil. If prices rise significantly – if not slightly – you can bet that President Trump will blame Saudi Arabia and OPEC. Because even though US policies have contributed to the reduction in supply, no president will accept responsibility for rising energy prices before polling day.

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It is hard to remember at a time when the United States held more power in the global oil markets. America has reversed its markets by becoming the World's largest producer and exporter of crude oil and refined products. But America's geopolitical influence far exceeds its role as an abundant, affordable and secure source of energy.

The United States also remains the largest consumer of oil, although China has outperformed imports and growth in demand. In the meantime, President Donald Trump has used his foreign policy to increase America's influence in the oil markets.

Trump demonstrated that he could move the oil markets with a few characters on Twitter. Under the Trump administration, the The United States imposed tough sanctions on oil exports from two unruly members of OPEC, Iran and Venezuela, movements that have radically changed the global offer.

These measures – combined with a supply-cutting agreement in force under the aegis of OPEC – are why oil prices soared to about $ 72 a barrel, against less than $ 50 end December. But the president did not exercise random sanctions. Before exerting "maximum pressure" on Iran and reducing the country's oil exports to zero, Trump secured badurances from Saudi Arabia, the main leader of OPEC, and some of its Gulf neighbors that they would compensate the lost Iranian casks..

The net effect was detrimental to both Iran and Venezuela while leaving room for growth in US exports. Saudi compliance has prevented oil prices from skyrocketing, making it a winning strategy for Trump.

It remains to be seen whether the Trump administration can maintain this delicate balance. Much depends on the relations of the administration, not only with Saudi Arabia, but also with Russia.

Political and economic interests do not always align, but it is undeniable that the real power in the oil markets is now shared between Washington, Riyadh and Moscow. Vienna – the headquarters of OPEC – is only a cosmopolitan context.

President Trump, Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin are now calling, to a large extent, the blows on the world oil markets. America, Saudi Arabia and Russia produce about 32 million barrels a day, about one-third of the 100 million barrels produced each day worldwide.

The fact that so much power rests in the hands of three leaders with a strong man's reputation means that things could change quickly. Saudi Arabia and Russia have been working to support oil prices since the end of 2016 through a coordinated reduction in supply, a policy that has benefited American producers with a new market share.

Even before the United States is tightening sanctions against Venezuela and Iran – both allies of Russia – Moscow suggested that it was not necessary to extend the supply reduction agreement of 1.2 million barrels per day with Saudi Arabia and the rest of l & # 39; OPEC beyond its expiration on June 30.

Now that Washington has dropped the hammer on Venezuela and Iran – without further renouncing sanctions for Iranian oil buyers as of May 2 – expect Moscow to insist that cuts to OPEC be canceled. The Russian authorities have not hesitated to hesitate to sacrifice market shares to US producers.

This point of view, however, does not correspond to Saudi Arabia's perspective. Saudi energy minister Khalid al-Falih said that his country's badurances to the United States did not mean that Saudi Arabia would break OPEC's deal and flood the oil market. In fact, al-Falih said that there was the opportunity to extend the agreement in the second half of this year.

The economic interest of Saudi Arabia is simple: it is estimated that the kingdom needs an oil price of $ 75 per barrel to balance its budget.

For the moment, it seems that Saudi Arabia can do everything for everyone. Although Trump wants to reduce Iranian exports to zero, compared to the current rate of about 1 million barrels a day, it is more likely that they reach a floor of 500,000 barrels a day since promised to continue to do business with the red nation.

Because Saudi Arabia pumps much less than its quota of 10.3 million barrels per day set by OPEC, Riyadh can make up for the 500,000 barrels lost per day while remaining in compliance with the supply reduction agreement.

This logic has hitherto kept oil prices under control. In the future, many problems could eventually convince one of the most reckless leaders of the New World Oil Order to step out of the ranks.

Could Russia's desire for US production prevail over its own economic need to drive up oil prices? How will Moscow's support for Caracas and Tehran be taken into account in oil policy decisions when Trump plans to change regimes in both countries?

How can Saudi Arabia maintain cooperation in managing world oil markets with Russia as it continues to reconcile with Trump?

And President Trump is facing his own challenges, especially his re-election in 2020. The Saudis are leading and Putin is not facing the same risk and can afford to play the long game if necessary.

Trump must also hold in check an increasingly anti-Saudi congress – still furious with the murder of journalist Jamal Khashoggi mitigating the progress of anti-cartel legislation "NOPEC" and efforts to end the war in Saudi Arabia in Yemen. New potential US sanctions against Russia's energy sector presented Congress add to the political risk for Trump.

In the meantime, all eyes are on the price of oil. If prices rise significantly – if not slightly – you can bet that President Trump will blame Saudi Arabia and OPEC. Because even though US policies have contributed to the reduction in supply, no president will accept responsibility for rising energy prices before polling day.