Trump tells OPEC to lower oil prices

Randal Sanchez
September 23, 2018

President Donald Trump linked American military support for Middle Eastern countries to oil prices on Thursday as he reminded OPEC nations that he has a long memory.

But on Tuesday Bloomberg cited unnamed Saudi sources as saying the kingdom was comfortable with oil above $80, at least for the short term, helping to push prices higher.

Opec and other producers, including Russian Federation, meet on Sunday in Algeria to discuss how to allocate supply increases to offset the loss of Iranian barrels.

Trump's tweet makes sense "with oil prices close to the highs of the year", said Giovanni Staunovo, commodity analyst at UBS Group AG.

The report said that Saudi Arabia wants oil to stay between Dollars 70 and USD 80 a barrel for now, as the world's biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until USA congressional elections.

Speaking of oil, recently oil prices were increased by 1.6% in the USA, as the US stocks fell by 5.3 Million barrels. The strategy worked. U.S. oil prices have almost tripled since crashing to $26 a barrel in early 2016.

Iran gradually increased its oil exports in 2016 and 2017 after its nuclear deal with world powers was implemented in January 2016 and its oil (including gas condensate) export revenues increased by 45% year-on-year in 2017, higher than the OPEC's average. Specifically, helping to underpin prices is another drawdown in US inventories and strong USA gasoline demand.

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Crude inventories fell 2.1 million barrels (Mmbbl) in the week ended September 14, to 394.1 Mmbbl - the lowest level since February 2015 - the Energy Information Administration reported.

USA sanctions on Iran are set to hit Tehran's oil sales on November 5, with S&P Global Platts Analytics forecasting that up to 1.4 million b/d of Iranian supplies will be shut-in.

The Republican president has lashed out at the Organization of Petroleum Exporting Countries over the past several months, demanding price cuts and output increases in targeted tweets. "The goal is to keep oil prices below $80/b and preferably in the mid-$70s range until after the United States election".

"As more evidence gathers that Iranian oil exports are heading sharply down, the more emboldened the oil market is likely to be to test, and breach this level".

Distillate fuel oil supplied over the last four-week period averaged 4.04 million barrels per day, down 0.8 percent from the same period past year.

While Saudi Arabia and Russian Federation have recently boosted output to compensate, it's unclear whether they're willing or able to offset all the losses from Iran.

Mostly, however, it's the uncertainty over how easily other producers can compensate for any lost supply.

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