According to the updated news report by Bloomberg, President Donald Trump had tweeted on Friday that the OPEC was artificially inflating oil prices. Oil prices in the West Texas Intermediate dropped 1.2% post this tweet but then rebounded as the effects of the tweet were short lived. WTI prices have rising 10% in the last two weeks.
According to Bill O’Grady, Confluence Investment Management’s chief market strategist, Trump just expressed that he was mad but couldn’t really affect the fundamentals. O’Grady stated that it was not easy to threaten a major oil producer and demand lower oil prices. He was referring to Iran at this point.
Saudi Arabian, Russian and UAE’s oil ministers pushed back on Trump’s remarks, stating that there was no artificial inflation of prices. They said that current market prices were a reflection of geopolitics as well as the strong demand for oil across the globe.
The Secretary General of OPEC, Mohammed Barkindo stated that the US was actually benefitting from the consortium’s efforts to stabilize the crude oil markets.
In the last few weeks a number of factors have impacted the oil prices. Firstly, output cuts from the OPEC initiative has reduced the world oil glut to normal levels. Geopolitical risks such as the possibility of the US re-imposing sanctions on Iran have also impacted the price of oil. And then it hasn’t helped that US shale production is also facing challenges and output is down.
The OPEC members and other oil producing countries met in Jeddah to discuss compliance to oil curbs. According to Saudi Arabia’s Energy Minister Khalid Al-Falih, despite the high levels of compliance in oil production cuts among the OPEC members and other oil producers, there is still room for oil prices to go up even beyond this week’s 3-year high.
The Energy Minister also said that this cooperation to control oil production would continue till 2019. He also stated that while the curbs have worked, crude oil inventory levels still remain much higher than before the down-turn.
After this meeting, the Russian Energy Minister told reporters that it was possible that oil prices could even jump to above $80 per barrel as soon as this month. However, this was dependent on many factors, he said, including geopolitics.
Height Securities LLC’s Katie Bays said that the goal the OPEC had set out to achieve are nearly met. She also said that the US President’s opinion on the matter would not really make a difference at this time.
The US’s president’s criticism of OPEC’s prices came at the same time as US oil inventories dropped to below their 5-year average for the first time in four years. The US oil producers deployed another 5 oil rigs this week, which pushed up the total number of oil rigs in production to 820. This is the highest number of oil rigs in production since 2015.
Despite the fact that the US is deploying more oil rigs, production issues continue to be a challenge, according to Paal Kibsgaard, Schlumberger’s Chief Executive Officer. Schlumberger is the world’s foremost provider of oilfield services. According to him, the US is facing shortages of sand, pipelines, equipment and labor, which together are threatening to reduce growth.
According to data from Goldman Sachs, the growth in oil demand across the globe for the first quarter of 2018 is expected to reach 2.55 million barrels per day. This will be the biggest year to date expansion since 2010. This is because demand has aligned itself with the optimistic expectations thus far in 2018.