Published: Thu, July 05, 2018
Economy | By

Trump to OPEC: 'Reduce pricing now!'

Trump to OPEC: 'Reduce pricing now!'

It pits one of his key foreign policy initiatives ("tough on Iran") against one of his most important domestic economic policies (the tax cuts), and the level of cognitive dissonance evident in these increasingly shrill OPEC tweets is so remarkable that one certainly imagines even the most gifted psychiatrists would struggle to dissect it. Irritated by what he feels is a lack of cooperation from the Saudis who head OPEC, added: "If anything, they are driving prices higher as the United States defends many of their members for very little $'s". While OPEC is facing mounting pressure from Trump to do more, America's sanctions on group members Iran and Venezuela are adding uncertainties, just as USA tariffs on Chinese goods kick in on Friday.

"This must be a two way street", he wrote, adding in block capitals, "REDUCE PRICING NOW!"

OPEC pledged to relax compliance with an agreement that helped balance an oversupplied market, but that might not be enough to address a looming deficit of around 2 million barrels per day.

The API reported a draw in gasoline inventories for the week ending June 29 of 3.1 million barrels.

The early reaction to Trump's tweet was normal.

The oil market has been supported by a fall in output from Venezuela and the potential for a halt of Iranian oil exports due to US sanctions.

"With contentious midterm United States elections looming, the President continues to strong-arm Saudi Arabia to increase oil supplies which, at least for now, is containing price action below WTI $75 per barrel", said Stephen Innes, Head of Trading for Asia/Pacific at futures brokerage OANDA. Speculators are using this narrative to support prices and unless there is an increase in production, prices are likely to be supported into the end of the year. The U.S. market will not have a settlement price due to the U.S. Independence Day holiday.

Chinese stocks fell sharply on Tuesday, with equity markets in Asia near nine-month lows as investors fear the Sino-U.S. trade row could derail a rare period of synchronized global growth. At the same time, the Saudi's are probably going to try to figure out how to get more oil into the market without causing a rift with its partners. The report will be released at 1500 GMT rather than the customary 1430 GMT.

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