- OPEC and Saudi Arabia are losing their control over the world oil market.
- That's due to booming US supply, which has helped offset OPEC's drastic supply cuts.
OPEC+ and Saudi Arabia's attempt to regain control of the oil market appears to be wavering, evidenced by the longest decline in crude prices in years.
Oil ticked higher on Friday, but prices have plunged over the past seven weeks, marking the longest slide in oil prices seen in five years, according to Reuters. Brent crude, the international benchmark rose 2% on Friday to $75 a barrel. That's down 18% from levels in mid-October, when Brent traded around $92 a barrel.
West Texas Intermediate crude rose 2% on Friday to $70 a barrel, still down around 19% from mid-October, when it traded around $89 a barrel.
The nearly two-month-long decline is a blow to OPEC and its de-facto leader, Saudi Arabia, which has been trying to staunch the fall in oil prices for the past year. OPEC+ members have repeatedly slashed production in 2023 and have agreed to a 2.2 million barrel-a-day cut through the first quarter of 2024.
Around 1.3 million barrels of those cuts are already being enacted by Saudi Arabia and Russia, which voluntarily chose to slash oil production through the end of the year.
Those reductions could be followed up with more production cuts if needed, Saudi Arabia's energy minister said. Previously, he said that the cartel was looking to smooth out distortions in the energy market, and suggested that the fall in oil prices was a "ploy" orchestrated by speculators.
Saudi Arabia's threats of tightening global supply, though, appear lost on oil market participants, who have written off the cuts as more supply hits the market, particularly from the US. US oil production has boomed this year, with crude exports from the US are nearing a record 6 million barrels per day.
Markets are also anticipating softer demand for oil in the future, particularly as economies around the world slow and governments place higher emphasis on increasing the use of renewable power.
US manufacturing activity fell in November, marking its 13th straight month of declines, according to the Institute for Supply Management. China, one of the world's largest crude consumers, is also battling a host of economic problems, which could keep demand low.
Those pressures could eventually push Saudi Arabia to wage oil "market share war" against the US, energy expert Paul Sankey told Business Insider, a tactical move that involves flooding the world's oil supply through the first half of 2024 to regain control of prices.