U.S. crude falls 32 cents after Trump's latest Twitter warning to OPEC

Muriel Colon
September 24, 2018

President Donald Trump blasted OPEC in a tweet Thursday morning, saying the Middle East wouldn't be safe without USA military protection and yet, countries there continue to keep prices high.

The US counts Saudi Arabia, OPEC's de facto leader, as a key ally and will be keen not to see a price surge ahead of the US midterm elections November 6, with Trump's Republican Party at risk of losing control of Congress.

Fears over supply shortages have boosted crude prices in recent weeks, and worldwide benchmark Brent was trading above $79 a barrel on Thursday.

"Investors are now assessing the Saudis' mixed message on oil prices versus its earlier pledge to increase output", said Hong Sungki, a commodities trader at NH Investment & Securities Co.in Seoul.

Among the countries capable of increasing production beyond current levels, Saudi Arabia and Russian Federation hold about three quarters of the spare capacity, according to Bloomberg calculations using data from the International Energy Agency.

The rebound gained steam earlier this year after production problems in countries like Venezuela and Libya caused the group to cut more deeply than they intended.

Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore, said Trump's remarks just days before the OPEC meeting put "a focus on the likely supply impacts of US -led Iran sanctions". This estimation was done by the EIA (Energy Information Administration).

Crude inventories fell by 2.1 million barrels, the EIA data showed, compared with expectations for a decrease of 2.7 million barrels.

Trump has been consistent in his demands and belief that oil prices are too high.

Brent crude is now trading near to $80 per barrel, close to its highest level since November 2014.

Saudi officials believe there is insufficient oil demand so far to justify raising Saudi output much beyond the roughly 400,000 bpd that it has pumped above its 10 million bpd target, OPEC and industry sources told Reuters. Our outlook on crude oil remains neutral. While Saudi Arabia and Russian Federation have recently boosted output to compensate, it's unclear whether they're willing or able to offset all the losses from Iran. However, the United State's numbers were less than Russia's 11.21 Million bpd for the same month. After starting the year around $60 a barrel, U.S. oil prices raced above $74 this summer.

The North Sea benchmark has been trading below $80 for the past week after conflicting reports of the market views of Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC).

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