Just nine days before a big OPEC meeting, US President Donald Trump had joined the oil-market fray, blaming the group for high prices.
“Oil prices are too high, OPEC is at it again. Not good!” the US president said on Twitter yesterday.
Trump’s grousing follows reports suggesting the oil exporters group was already planning to open the spigots, an outcome the International Energy Agency hinted at in its monthly report released earlier Wednesday.
“Statements by several parties suggest that action in terms of higher supply could be on the way,” said the IEA, which represents the US and other oil-consuming nations.
The IEA suggested the June 22 OPEC meeting in Vienna would need to boost output because of a political crisis in Venezuela that has pinched petroleum output and Trump’s decision to exit the Iran nuclear pact, which is expected to result in lower production from the Middle Eastern country.
Under one scenario weighed by the IEA, output from Venezuela and Iran by the end of 2019 could be 1.5 million barrels per day lower than it is on Wednesday.
“To make up for the losses, we estimate that Middle East OPEC countries could increase production in fairly short order by about 1.1 mb/d and there could be more output from Russia on top of the increase already built into our 2019 non-OPEC supply numbers,” the IEA said.
OPEC flows were already higher in May, led by Saudi Arabia, the IEA said, adding that the oil kingpin was still in compliance with the Vienna deal caps.
Citing “people briefed on the discussions,” Bloomberg on Wednesday said Saudi Arabia had floated several oil output hike plans to fellow cartel members.
On the sidelines of the opening match of the World Cup today, President Vladimir Putin and Saudi Crown Prince Mohammad bin Salman will meet to discuss oil policy, Bloomberg added.
Trump’s complaints about OPEC come amid expectations of a more costly US summer driving season. A gallon of regular gasoline is currently USD 2.91, up 25 per cent from the year-ago level.
Analysts attribute the rise in prices in part to OPEC’s action to defend prices.
OPEC and non-OPEC producers struck a deal in late 2016 to trim production by 1.8 million barrels per day to reduce a global glut that had sent prices crashing. Key producers, including Saudi Arabia and Russia, have reaffirmed the deal since then.
But Matt Smith, director of research at ClipperData, said Trump himself is responsible for some of the pressure due to the decision to exit the Iran deal.
“It’s confusing why the president would come out with a statement like this now,” Smith said. “The real catalyst for the recent rise in prices is the sanctions on Iran.”
While the world turns its eyes on the Vienna OPEC meeting, oil market watchers are also monitoring activity in Trump’s home market, where higher prices are feeding more production of American shale oil.
US production of oil came in at 10.9 million barrels per day last week, according to data released Wednesday, the US Energy Information Administration, up nearly 17 per cent from the year-ago level.
OPEC itself spotlighted US output in its own monthly report yesterday, citing the growth of non-OPEC supply as one of several question marks hanging over the situation.
Various sources show that “considerable uncertainty as to world oil demand and non-OPEC supply prevails,” OPEC said, leading to a wide range of estimates for the remainder of 2018. (AFP)