Trump declares oil prices too high, blames OPEC

Mae Love
June 14, 2018

In April, Saudi Energy Minister Khaled al-Faleh said the global market has the capacity to absorb higher oil prices, according to Agence France-Presse - a remark that drew Trump's wrath.

Earlier in the session, Brent and USA crude had retreated on concerns about rising production in the United States and expectations that OPEC and other producers could relax voluntary output cuts. "Adjusted for inflation, these prices are not out of line with where we've seen oil prices for the last decade or two".

The U.S.is putting pressure on OPEC members to increase production as global benchmark prices flirt with $80 a barrel, raising pump prices in the months before the U.S. votes in midterm elections that could decide which party controls Congress. USA estimated gasoline demand hit a record high of 9.88 million bpd in the week, the data said.

Analysts polled by S&P Platts expect the EIA to report a 2.6 million barrel drop in crude supplies and a 200,000 barrel increase in gasoline supplies.

OPEC and other producers will meet on June 22-23 in Vienna to discuss future production.

US production rose to 10.9 million barrels a day in the week, but Kilduff said the market appeared able to absorb the increase. "It seems like we need nearly every barrel of that to keep up with this refining demand".

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Oil prices have risen by around 60 per cent over the previous year after the Organization of the Petroleum Exporting Countries and some non-OPEC producers, including Russian Federation, started withholding output in 2017 to reduce excess supply.

Even if the supply gap, triggered by the return of United States sanctions on Iran and a major political crisis in Venezuela, is plugged, the oil market will likely remain vulnerable to disruption next year, the IEA warned. A gallon of regular gasoline is now $2.91, up 25 percent from the year-ago level. Saudi Arabia has already started pumping more crude. "Unofficial sources have said Russian Federation will propose to return production back to the October 2016 (level), i.e. removing the cap altogether over a period of three months".

But the International Energy Agency said it believes the prices are unlikely to rise as sharply as they have in the past few months, CNBC reported.

The agency is forecasting global oil demand will grow by 1.4 million barrels per day (bpd) in 2019 - topping 100 million bpd in the second quarter of the year.

Trump tweeted on Wednesday: "Oil prices are too high, OPEC is at it again".

A mix of new US sanctions on Iran, chaos in Venezuela and robust global growth has tightened the oil market.

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