Trump says King Salman 'agree' to crash oil prices

Ardebili

Trump says King Salman 'agree' to crash oil prices

President Donald Trump has asked Saudi Arabia's king to increase oil production to make up for a shortfall from Iran and Venezuela.

"He has agreed!", Trump said on Twitter Saturday. However, the price action on Friday suggests that buyers are still coming in and aggressively willing to chase this market higher.

The White House statement undercut a tweet by Trump earlier in the day when he wrote that Saudi Arabia had definitely agreed to produce more oil. It produces around 10 million barrels of crude per day, according to OPEC.

Saudi Arabia now produces some 10 million barrels of crude oil each day.

Analysts say that Saudi help in making up for lost Iranian crude oil will be crucial to Trump's efforts to put pressure on the government of Iran while not forcing prices up too high to cause political damage in the United States.

Oil prices rose sharply in the spring as production collapsed in crisis-ridden Venezuela and traders anticipated Trump's withdrawal of the United States from the Iran nuclear deal.

"Saudi Arabia obviously can deliver as much as the market would need, but we're going to be respectful of the 1-million-barrel cap - and at the same time be respectful of allocating some of that to countries that deliver it", al-Falih said then.

Brent crude, the worldwide benchmark, was selling Friday for over $79 a barrel, and there is talk that in certain circumstances a return to $100 a barrel oil is possible.

US oil prices have been boosted by falling domestic stocks - the US Energy Information Administration on Wednesday revealed that crude supplies dropped by 9.9 million barrels for the week ended June 22-the largest weekly drop so far this year. Saudi Energy Minister Khalid Al-Falih indicated the group's action would add almost one million barrels a day to the market.

Oil was the star commodity over 2017-18, and now, despite the move by OPEC to ease its production cap (with Russian Federation and other producers), some analysts are wondering when $US100 a barrel will be regained for the first time since 2014.

"Once you get above that level, we are into uncharted territory", said David Fyfe, chief economist at the Gunvor Group, a major trading house.

His latest comments come a week after ministers from the Organization of the Petroleum Exporting Countries - of which Saudi Arabia is the major member - had already agreed to raise output from July.

The curbs were meant to help drain a global oil glut, a goal that has largely been achieved, though supply disruptions are now adding pressure to prices. "While Saudi Arabia has the capacity in theory, it takes time and money to bring these barrels online, up to one year", she said.

"I guess the Saudis want to give the confidence to Trump to go very hardcore on Iran", tweeted the oil market's most vocal bull, commodities hedge-fund manager Pierre Andurand.

Latest News