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!
Oil dropped after President Donald Trump tweeted a bearish statement that attacked OPEC for inflating prices. But his very own tweets may have had something to do with the fact that prices are the highest since late 2014. “Actually, Trump is at it again,” said Matt Badiali, Banyon Hill senior research analyst. “The prices we’re seeing right now are a combination of trouble in the Middle East with Syria and a looming Iran conflict and Trump’s tweets are fueling the drive up in oil prices.”
The Saudis – Trump’s right on this one. The world’s biggest oil exporter has signaled it wants to push prices even higher, to around $80 a barrel, as it seeks to fund the expansive (and expensive) economic agenda of Crown Prince Mohammed Bin Salman and support the valuation of state energy giant Aramco before an initial public offering.
Russia – Saudi Arabia’s most important ally in cutting output has backed extending the effort through the end of this year. Meanwhile, tensions are rising between the West and the world’s largest crude producer. The U.S. and Europe announced tough sanctions on Russia in recent weeks, including limits hitting oligarchs in the energy sector, although Trump did reverse a plan earlier this week to impose more restrictions.
The Iran Deal – Fears that Trump will reimpose sanctions on Iran when the nuclear deal is reviewed, largely arising from the president’s public comments, are adding to uncertainty in the market. The Obama administration’s agreement with Iran has boosted production from the nation by more than 1 million barrels a day. A Bloomberg survey of oil-market analysts found a 50-50 chance of a sanctions “snap-back,” which could halt as much as 800,000 barrels a day of exports from OPEC’s third-largest producer within six months. Watch prices rise then.
Venezuela’s Meltdown – This OPEC member has seen its output decline amid political and economic strife. Trump has added to the pressure, with a drive to impose tough sanctions to punish President Nicolas Maduro. Among those hit by sanctions are the former chief financial officer for the state-owned oil producer, Petroleos de Venezuela SA. A cryptocurrency introduced by Maduro, based on the nation’s massive oil reserves, may also face sanctions, the U.S. has warned.
Trade Wars – Trump’s tough trade talk, and tit-for-tat tariffs between the U.S. and China, have roiled global markets and raised the specter of further restrictions, at a time when American oil and gas exports are rising. In March, the industry said a new White House levy on steel imports could increase the cost of steel for wells by 25 percent and discourage pipeline construction as well.
Consumers – Global oil demand likely climbed by 2.6 million barrels a day in this year’s first quarter, the biggest year-over-year jump since 2010, Goldman Sachs Group Inc. said on Thursday. Rising consumer spending as well as cold weather in Europe and the U.S. helped boost demand, keeping Brent on track to reach $80 in the coming months, the Goldman analysts said.
Assessing the Percentages
It’s difficult to assign a percentage to any of those items. Unless one item is the key, the concept may not even make much sense.
We can say that Trump compounded the situation with Iran sabre rattling, trade wars, a venezuelan embargo, and Russia sanctions.
Trump is clearly rattled by the price of oil but he needs to take at least partial ownership of points two through five.
Moreover, the rising price of oil will add to the trade deficits.
If Trump wants to do something that makes sense for numerous reasons, he should start by throwing his Iran policy book in the ashcan where it belongs.
Mike “Mish” Shedlock
Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones
you like and you can unsubscribe at any time.
“With record amounts of Oil all over the place, including the fully loaded ships at sea…” -President Trump // How does one raise prices in the face of a glut? Are we t believe that the law of supply and demand have been repealed? Could it be that the global saber rattling, giant military exercises and naval fleet movements are diverting domestic oil supply streams?
JonSellers
5 years ago
Seems like everybody and their mother have gone out and bought a pick up truck or big SUV over the last couple of years. I’ll blame the Great American Consumer for the run up in demand and prices.
Escierto
5 years ago
Trump has this deluded idea that he rules the world by tweet. Of course he does rule his cult members like that so it does work on some people. The rest of us just go on as though he doesn’t exist.
tedr01
5 years ago
I agree with you 100%. Speculators have pushed oil futures prices up but these oil prices can’t and won’t hold for long. Trust me. OPEC is a dying entity because crude oil won’t be required to fuel cars and trucks much longer. R.I.P. OPEC.
Stay Informed
Subscribe to MishTalk
You will receive all messages from this feed and they will be delivered by email.
Interest rates, period
“With record amounts of Oil all over the place, including the fully loaded ships at sea…” -President Trump // How does one raise prices in the face of a glut? Are we t believe that the law of supply and demand have been repealed? Could it be that the global saber rattling, giant military exercises and naval fleet movements are diverting domestic oil supply streams?
Seems like everybody and their mother have gone out and bought a pick up truck or big SUV over the last couple of years. I’ll blame the Great American Consumer for the run up in demand and prices.
Trump has this deluded idea that he rules the world by tweet. Of course he does rule his cult members like that so it does work on some people. The rest of us just go on as though he doesn’t exist.
I agree with you 100%. Speculators have pushed oil futures prices up but these oil prices can’t and won’t hold for long. Trust me. OPEC is a dying entity because crude oil won’t be required to fuel cars and trucks much longer. R.I.P. OPEC.