Trump eyes oil prices: ‘OPEC is at it again’

Cornelia Mascio
Giugno 15, 2018

For the last month, the oil price has successively marked lower intraday highs and lows, indicating that traders and investors are not quite as confident in the outlook for the supply/demand balance, especially given the steep rise in USA crude production and the splintering within OPEC. "Not good!" the president said.

On Wednesday, the national average for a gallon of regular stood at $2.91, up 25 percent from a year ago, according to the AAA auto club. Members of the cartel, led by Saudi Arabia, and other big producers including Russian Federation have played a role in reversing the plunge in crude prices that started in 2014.

Brent crude futures, the global benchmark for oil prices, were at $76.46 per barrel at 0046 GMT, down 28 cents, or 0.4 per cent, from their last close.

"We have looked at a scenario, not a forecast, showing that by the end of next year output from these two countries (Venezuela and Iran) could be 1.5 mb/d (million barrels per day) lower than it is today", it said in a report.

USA bank Morgan Stanley said Opec and its partners had "largely achieved their stated objective of rebalancing the oil market". And while purchases have waned as shale production has grown, America is traditionally one of the biggest customers for Saudi oil. The country boosted production after the US lifted sanctions related to Iran's nuclear program in 2016, but analysts expect output to fall when the Trump administration's decision to withdraw from the deal takes full effect later this year. "I think it will be a reasonable and moderate agreement" but nothing "outlandish", he said.

The change in Saudi tone came after major oil consuming nations, including the U.S., India and China, complained about rising fuel prices. They face growing pressure, not least from the Twitter account of U.S. President Donald Trump, to increase supply to offset disruptions caused by the economic crisis in Venezuela and renewed American sanctions on Iran.

Brent and WTI hit 3-1/2-year highs in May but have since drifted lower, indicating investors expect the market to soon become better supplied as USA crude production rises and as OPEC and its allies look poised to increase output. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High!

Trump drew lots of tweeted responses, including one from oil hedge fund founder Pierre Andurand, who expects prices will be above $150 a barrel in less than two years. Another issue raised by Pradhan was the "Asian Premium" - or a higher price - charged by West Asian oil exporters for shipments to Asian buyers, as opposed to Europe.

But the rising output was met by strong demand, which traders said prevented prices from falling further.

With assistance from Michael Roschnotti. All comments are subject to editorial review.

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