Oil prices turned sharply lower yesterday, tumbling more than 3 percent, after President Donald Trump urged OPEC to lower the cost of crude.
“Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” the president said in an early morning tweet.
The message comes two months into a fresh round of price-boosting production cuts from OPEC and other nations. The producers meet in mid-April to review the deal, which is scheduled to last through the first six months of 2019.
International benchmark Brent crude futures were down $2.31, or 3.4 percent, at $64.81 a barrel. Brent hit $67.73 a barrel on Friday, its highest intraday level since mid-November.
Monday’s tweet marks the return of Trump’s criticism of OPEC, a staple of his second year in office and his early political messaging before running for president.
Trump has not tweeted about OPEC since early December, right before the producer group and 10 allied nations led by Russia defied his calls to keep pumping at high volumes. The group instead agreed to cut 1.2 million barrels per day from the market.
The so-called OPEC+ alliance reached the deal after oil prices sank more than 40 percent in the final quarter of 2018. The group first began curbing output in 2017 to end a punishing downturn, but lifted the caps last June as oil prices hit 3½-year highs ahead of Trump’s sanctions on Iran, OPEC’s third biggest producer at the time.
The producers – and Saudi Arabia in particular – hiked output through November, when Trump surprised them by allowing some of Iran’s biggest customers to continue importing its oil as sanctions snapped back into place. The move contributed to the pullback in prices.
Saudi Arabia has now sharply reversed course. After its output surged to a record 11.1 million barrels per day in November, it has throttled back production to 10.2 million bpd. Saudi Energy Minister Khalid al-Falih says the Saudis will cut even further, pumping at 9.8 million bpd next month.
“When you read into the implication of (Trump’s tweet), it’s twofold. First you have to believe the Saudis are going to take note. They have in the past,” said John Kilduff, founding partner at energy hedge fund Again Capital.
“And then you have to believe that another round of waivers on the Iran sanctions has to be on the table, and I think that’s the secondary implication from that tweet.”
Daily Trust