The United States has just become the world's largest oil producer – but that may not last long under Trump's Iranian policy

The United States Energy Information Administration (EIA) said Tuesday that the United States had probably overtaken Saudi Arabia and Russia earlier this year to become the world's largest producer of crude oil. The EIA based its disclosure on preliminary estimates in its short-term Energy Outlook, published monthly.

The United States, which was widely covered by the media at the time, bypassed Saudi Arabia in February to become the world's second-largest oil producer, according to the EIA. This is the first time in more than 20 years that the United States has produced Saudi Arabia. Then, in June and August, US production surpassed Russia for the first time since February 1999.

EIA expects US crude oil production, mainly slightly sweet crude oil, to continue to exceed Russian and Saudi crude oil production for the remaining months of 2018 and up to the end of the year. 2019.

EIA disclosure comes as oil markets attempt to understand supply and demand issues, as well as geopolitical uncertainty. Since President Trump decided in May to reinstate sanctions against Iran for its nuclear development program, uncertainty has taken hold of the market. The first round of new sanctions against Iran was put in place in August, while other tougher sanctions against the country's energy sector will come into effect on November 4.

Trump's dilemma

With the prospect of the elimination of 1-2 million barrels per day (barrels per day) of Iranian barrels in world markets, Saudi Arabia, probably under the pressure of Trump and Russia, s & rsquo; Is already committed to increasing its price cap production. This uncertainty comes as mid-term congressional elections, scheduled for November, are crucial. The concern for Trump and Republican candidates has been the rise in world oil prices and the rise in gas prices that have hit voters in the pocketbook and which have probably caused electoral reactions.

It now appears that an OPEC led by Saudi Arabia has taken up its responsibilities. The cartel's oil production rose last month by 278,000 bpd over the previous month, OPEC announced yesterday. However, the increase in production is due to an increase in production in Iraq, Libya and Nigeria. Both Libya and Nigeria have experienced severe production problems this year, causing more supply problems for the market.

OPEC also said that global oil supply increased by 490,000 barrels per day in August to 98.88 billion barrels, due to growth in OPEC production and country production. industrialized oil consumers. According to EIA estimates, growth is expected to be slower than expected.

Crude oil production in the United States is expected to increase from 840,000 barrels per day to 11.5 million barrels a year next year, down 1.02 million barrels a day to 11, 7 million barrels. The growth in oil demand in 2019 is expected to increase by 250,000 b / d, a decrease of 290,000 b / d compared to the previous EIA forecast. The EIA left 2018 growth forecasts for production and demand unchanged.

US production this year is expected to increase from 1.31 million b / d to 10.66 billion bpd, unchanged from previous EIA forecasts. Demand in 2018 is expected to grow 470,000 b / d, also unchanged.

A slowdown in US output growth next year comes at a difficult time for the oil markets, particularly with the reduction in Iranian production while uncertainties remain in Venezuela, Libya and Nigeria, all three producers of OPEC.

In addition, despite the increase in production in August, OPEC also issues a warning on the demand side of the oil markets equation. On Wednesday, OPEC's analysis arm said the cartel's crude oil demand would be nearly 1 million bpd higher than the level produced in August. Global raw material data provider S & P Global Platts said this shows that the producer group will have to bring more barrels into the market to avoid a tightening of supply.

Russia, for its part, rescued an OPEC led by Saudi Arabia in early 2016 by agreeing to cut production to drive up world oil prices that led the kingdom into the red, forcing it to obtain funds by issuing international bonds. and by unpopular austerity measures, also warns that oil markets remain "fragile" due to geopolitics and production declines in key regions. Russian Energy Minister Alexander Novak issued a note of caution on Wednesday at an economic conference in the Russian city of Vladivostok.

Fragile situation

Novak said that "today, the situation is quite fragile, of course, and that not all countries have managed to restore their market and their production".

He cited decreases in Mexican production of more than half this year and the decline in production in Venezuela from about 50,000 b / d, falling by half to just over 1 million bpd, adding that the market is still not balanced. "

Novak also said that the sanctions against Iran bring "huge uncertainty in the market – how countries buying nearly 2 million bpd of Iranian oil will act."

However, if the pressure rises and markets need more supply, Russia will be able to increase production by 300,000 bpd mid-term, he added, in addition to the October 2016 level. Russia produced 11.247 million bpd this month, a record of the post-Soviet era.

A six-nation monitoring committee overseeing the supply agreement between OPEC and OPEC will meet on 23 September in Algiers to assess the conditions of the global oil market.