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Published: Apr 4, 2023
Updated: Apr 4, 2023

OPEC+ Production Cut Sparks Battle for Asia's Oil Demand

The recent surprise cut in oil production by OPEC+ members has opened the door for other producers to compete for markets in Asia. Since 2017, OPEC+ member states have favored Asia at the expense of the US, with 70% of oil from the group going to Asian countries in 2022, up from 61% in 2017. This has led to an increase in US oil production, and American exporters may now look to gain a larger market share in Asia.

Rising US Oil Production

American oil production has surged in recent years, thanks to increased production from shale deposits. This has led to a reduction in US reliance on OPEC+ oil, and American refineries have boosted their ability to process lighter crude grades from places like the Permian and Eagle Ford. Currently, 63% of oil processed by US refiners is produced domestically, up from 41% a decade ago.

Competition for Asian Markets

Refiners in Asia can also process lighter oil grades, which puts American fuelmakers in competition with buyers from Asia. However, the US still imports close to 580,000 barrels daily of medium and heavy grade crudes from OPEC+, which could become harder to source due to the production cuts. The impact of the expected cut to supplies from OPEC+ will likely start affecting deliveries to the US in July, during the peak summer driving season. American buyers may need to start looking for alternatives soon.

Sets stage for a battle over Asia's oil demand

The OPEC+ production cut has set the stage for a battle over Asia's oil demand, with American exporters looking to gain a larger market share. As the US reduces its reliance on OPEC+ oil, American fuelmakers may face competition from buyers in Asia for lighter crude grades. Meanwhile, the production cuts could make it harder for the US to source medium and heavy grade crudes from OPEC+