Donald Trump has launched a broadside against Opec for pushing oil markets to the highest level since 2014, saying that crude prices have been driven up “artificially” by the cartel.
The US president’s statement, made in one of his customary early morning tweets, followed comments by Saudi Arabia’s energy minister on Friday that the world economy could cope with higher oil prices as crude approached $75 a barrel.
“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!” Mr Trump tweeted.
Mr Trump’s comments will be seen as a warning in Saudi Arabia not to allow oil prices to run too high, at a time when Riyadh is pushing the US to back them in confronting Iran.
Brent crude oil fell by roughly a dollar following Mr Trump’s tweet, having hit a near four-year high of $74.75 a barrel on Thursday.
The kingdom, which together with Russia has led big oil producers in cutting oil output since early 2017, wants a closer alliance with the Trump administration than it enjoyed with his predecessor, Barack Obama.
Mr Trump’s intervention poses a dilemma for Saudi Arabia’s powerful Crown Prince Mohammed bin Salman, who needs a higher oil price to help his efforts to modernise the kingdom’s economy. But he has also spearheaded attempts to bolster the country’s alliance with the US.
Prince Mohammed toured the US for three weeks this month where he met Mr Trump and courted business executives to invest in his plans to modernise Saudi Arabia.
Opec continues to cut daily oil output Amy Myers Jaffe, a senior fellow at the Council on Foreign Relations, said Mr Trump was sending a message that, while the shale boom has made the US one of the world’s largest oil producers, it still cared about the effect of rising prices.
“This tweet is a direct signal to Saudi Arabia that they are making the president’s job harder, not easier,” said Ms Jaffe, who has advised previous presidents on energy. “The president is tweeting now because sharply rising oil prices make US strategic decision-making and diplomacy more difficult, as well has having a direct impact on his political base if gasoline prices go up in the summer.”
Reimposing sanctions on Iran — something Mr Trump may do as early as next month — would be politically more difficult if oil prices kept rising.
Venezuela, where a political and economic crisis has led to oil production falling to the lowest level in 30 years, also poses a threat to the oil market, as well as US refineries that have been the biggest overseas customers for its crude.
Reports quoting people briefed by Saudi officials have proliferated in the past week, saying the kingdom was targeting prices at $80 or even $100 a barrel. Riyadh needs to raise the value of state-oil company Saudi Aramco, a portion of which it plans to list to fund plans to modernise the economy.
Khalid al-Falih, the Saudi energy minister, defended the price rise on Friday, saying the world economy had the “capacity” to handle it but has denied the kingdom had a price target.
“I have not seen any impact on demand with current prices,” Mr Falih said at a meeting in Jeddah between Opec members and Russia to review their supply deal. “We have seen prices significantly higher in the past, twice as much as where we are today . . . There is the capacity to absorb higher prices.”
Despite Mr Trump’s declaration that oil markets were well-supplied, analysts believe the market is tightening rapidly.
The International Energy Agency said last week that Opec was close to being able to declare “mission accomplished” in its aim of reducing oil inventories that had grown during the 2014 crash. That crash drove prices briefly below $30 a barrel from above $100 at the start of the decade.
Source: Financial Times