Trump to OPEC: 'Reduce pricing now!'

Share

Renewed U.S. sanctions on Iranian oil appear set to tighten supplies further.

In April, Iran's oil minister Bijan Zangeneh said that $60 a barrel is a good price for oil. OPEC is doing something to help with its recent agreement to raise production by almost the entire amount of its spare - or idle - capacity. "A blockade of this transport route would thus have dramatic consequences for global oil supply and an impact on prices that is nearly impossible to put into figures".

Brent crude futures were at $77.99 a barrel at 1345 GMT, down 25 cents. "This must be a two way street, REDUCE PRICING NOW!"

An Iranian Revolutionary Guards commander, meanwhile, said on Wednesday that Tehran might block oil shipments through the Strait of Hormuz, a major route for transporting crude in the Gulf.

Zanganeh said Trump's anti-OPEC remarks are the causes of the increase in the prices in the oil market over the past days. The outage at the 360,000 barrels per day (bpd) Syncrude facility in Canada has contributed to a sharp reduction in the discount for USA crude versus Brent crude over the past month.

Oil prices dropped yesterday, falling 97 cents to $73.17. As the 2018 mid-term elections loom, Trump's threat to the Saudi-led OPEC oil cartel is a sign to voters that he's doing something about rising prices at the pump (even if it's just sending tweets).

"Investors are cautious since no one knows to what extent the Iranian sanctions will impact the market, and disruptions globally are taking supplies out faster than expected", said Will Yun, a commodities analyst at Hyundai Futures in Seoul.

Iran's representative to OPEC, Hossein Kazempour Ardebili, replied on Thursday by blaming Trump. Trump's decision in May to pull out of the United Nations -backed nuclear agreement with Iran, meanwhile, means sanctions on the Iranian energy sector snap back into place in November.

A USA government report also weighed on prices this week, by crude stockpiles rose 1.3 million barrels and showing unexpectedly ample supplies after analysts had forecast a decline. Saudi Arabia agrees with Trump on the importance of keeping prices down but has not committed to increasing output sufficiently.

Prices could weaken over the short-term because technically, the markets may be overvalued. High fuel prices drain money from consumers' pockets, hurting economic growth while adding to inflation. The Saudi Cabinet affirmed the kingdom is ready to use its spare capacity as needed, while Energy Minister Khalid Al-Falih reiterated with Russian Federation that OPEC's agreement with allies is to boost output by 1 million barrels a day.

USA crude futures fell US$1.20 to settle at US$72.94 a barrel, retreating from Tuesday's 3 1/2 year high of over US$75. Many coutries have not committed to the United States ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.

Share