BackOil price rally fizzles as Opec again faces dilemma over Trump tweet
US President Donald Trump tweets oil prices are getting too high and calls on Opec to 'relax and take it easy'Oil’s recovery in 2019 has been propelled by output curbs by Opec, with Saudi Arabia making the deepest cuts
PremiumTokyo: Oil prices are stumbling after a 30% rally since Christmas Eve as speculation swirls over whether Organization of the Petroleum Exporting Countries (Opec) will heed US President Donald Trump’s call to temper prices.
Futures in New York extended losses after sliding 3.1% on Monday, the most in four weeks. While crude is still over 25% below a four-year high in October, the US president tweeted on Monday that prices are getting too high and called on Opec to “relax and take it easy". Oil’s recovery in 2019 has been propelled by output curbs by Opec, with top member Saudi Arabia making the deepest cuts.
Last year, the Saudis obliged when Trump urged that taps should be kept open as his administration sought to shrink Iranian exports to zero via sanctions. Then the US eased its hardline demand that the Persian Gulf state’s customer halt purchases and gave a number of them waivers to buy limited quantities. That US move triggered a 38% collapse in crude in the fourth quarter, dealing a blow to economies of Opec members.
The group has learned from that mistake and is unlikely to repeat it, according to two oil officials in the Gulf region who asked not to be identified. Still, investors are wary over whether Opec will be able to defy Trump, who could enforce legislation that shakes the organization to its foundations. The Saudis, meanwhile, are also facing political backlash in the US for the murder of Washington Post columnist and critic Jamal Khashoggi.
“After a crude rally this year, it was just a matter of time before Trump tweets" at Opec, said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. “Given Saudi Arabia owes a lot to Trump, who defended them after the killing of a Saudi journalist, it cannot be ruled out Saudis would have to follow the US president’s demand."
West Texas Intermediate for April delivery traded at $55.32 a barrel on the New York Mercantile Exchange, down 16 cents, at 3:38pm in Singapore. The contract decreased $1.78 to $55.48 on Monday, the lowest level since 14 February.
Brent for April settlement slid 1 cent to $64.75 a barrel on the London-based ICE Futures Europe exchange. The contract dropped $2.36 to $64.76 on Monday.
The global benchmark crude traded at a $9.43 premium over WTI.
Opec and its allies including Russia began output cuts last month to avert a glut being created by booming American shale-oil supplies and fragile global fuel demand. While that’s helped prices, growing optimism about a trade deal between the US and China as well as America’s sanctions on Iran and Venezuela have also boosted crude. Goldman Sachs Group Inc. said this week that Brent may take a fleeting trip to $70-$75 a barrel.
US crude inventories probably rose 3 million barrels last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Wednesday confirms that, it will be the sixth consecutive weekly gain.
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