Illustration: Luo Xuan/GT

At a ministerial-level meeting in Abu Dhabi on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) and its oil-producing allies reaffirmed the compliance to the previous output reductions. OPEC+, a 14-nation cartel and a group of 10 allied countries, previously agreed to cut oil output by 1.2 million barrels per day (bpd) beginning early 2019.

While OPEC has been trying to support oil prices this year, it now seems increasingly difficult for it to boost oil prices simply by cutting production. Due to the US-China trade war and a global economic slowdown, OPEC recently lowered its forecast for global oil demand in its latest monthly report.

Besides the weakening oil demand, the dominant impact of the oil cartel on the world crude market is also facing challenges from the rapidly increasing oil exports from the US.

Previously, as the world's largest oil consumer and importer, the US has played a major role in affecting the supply and demand of oil in the global market. But thanks to its expanding shale production, the US is now self-sufficient in oil and is counted as one among the major oil exporters. Such a shift has fundamentally changed the supply and demand pattern in the global oil market, which lost a big buyer and saw the US rise as a big seller. 

Nevertheless, it should be noted that the US government targets more than just energy independence. Dan Brouillette, US deputy energy secretary, said in a recent interview to CNBC that the US wants energy dominance regardless of what happens to oil prices. "Our energy policy is not designed to affect price, that's not we do for a living. And yet it does because of our production numbers," he noted. "The president has an 'all of the above' strategy. He talks often about energy dominance and the world often asks: what does that mean? It just simply means that we are going to produce as much energy as we can, as cleanly as we can and as affordably as we can."

The US official's statement points to nothing but the US government's ambition to dominate the global energy market and the confidence behind that ambitious goal comes from the rising production capacity in the US. According to the International Energy Agency, the US has briefly overtaken Saudi Arabia to become the world's top oil exporter. Also, data from the Energy Information Administration (EIA) showed that US oil output set its weekly record of 12.5 million bpd in August.

Citing EIA data, Brouillette also mentioned that the country is on a quest to produce more than 13 million bpd this year and the number will possibly soar to 13.5 million bpd in 2020.

As such, the competition for market share between the US and the OPEC+ producers is bound to get tougher. 

The US' ambition to dominate the global energy market is of great significance to China, which may see its energy security and energy costs face a risk. As a fast-growing emerging market, China has quickly become the world's largest oil importer, as well as an important stakeholder in the global oil market. 

Yet, there isn't any foreseeable reason to worry about it. Although Brouillette said the US doesn't pay a heed to the oil prices, a stable oil price is necessary. If the price is too low, the healthy development of US oil companies may be affected. If the price is too high, the manufacturing costs will rise, to the detriment of the US real economy. Furthermore, OPEC and Russia still control more than 60 percent of the world crude supply.

But it should be pointed out that China doesn't have that much ambition to dominate the energy market, but given its huge demand, it is pertinent to strengthen its position in the global oil pricing system. It is based on such consideration that China launched the yuan-denominated crude oil futures contracts on the Shanghai International Energy Exchange in March 2018. With trading volume growing strongly, the Shanghai crude oil futures has become the world's third most active crude contracts in its first year, second only to Brent and US West Texas Intermediate, thus grabbing a market share of about 6 percent. Statistics showed that total trading volume of the crude oil futures contracts in its first year was 36.7 million lots, with a turnover of 17.12 trillion yuan.

China as the world's second largest oil consumer and its huge economy allowed the country to establish an Asian oil price benchmark or have a bigger say in oil pricing system that has long been dominated by the US and European countries.

In general, China and the US are both increasing their influence on the world crude oil market in their own approaches.

The author is a reporter with the Global Times bizopinion@globaltimes.com.cn