Oil prices fell significantly on Monday after US President Donald Trump tweeted a plea to OPEC to “relax and take it easy” and warned that the “world cannot take a price hike – fragile.”
Oil prices down almost 3 per cent following Trump tweet
Oil prices fell almost 3 per cent on Monday after President Donald Trump called for OPEC to “relax and take it easy” on their supply cut agreement that has recently boosted oil prices.
By 2:27 p.m., EST, benchmark Brent crude futures had fallen $1.99 to $65.26/barrel and West Texas Intermediate crude futures were down $1.63 to $55.63/barrel.
Early Monday morning, Trump tweeted “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!”
Following the tweet, oil prices reversed earlier gains that were built on tightening supply and optimism that the United States and China would see progress with trade talks in the coming weeks.
Since the start of the year, oil prices have gone up about 20 per cent. OPEC and its supply cut allies entered into an agreement to cut their total production by 1.2 million barrels per day beginning on Jan. 1.
Along with the OPEC agreement, US sanctions on Iranian and Venezuelan crude have helped tighten the oil market, despite rising US production.
“If you read into it, I think there’s speculation there will, in fact, be another round of waivers granted to countries and companies to buy Iranian oil,” John Kilduff, a partner at Again Capital Management, told Reuters about Trump’s tweet. “That’s also why you’re seeing the negative reaction.”
US sanctions against Iranian crude exports began in November. Prior to the imposition of the sanctions, the Trump administration announced it would grant waivers to a number of Iran’s largest customers. That month, Brent futures fell 22 per cent and the waivers inspired OPEC to enter into another supply cut agreement.
Unrest in Venezuela and Libya is also factoring into rising oil prices.
“Supply risk is ever present with Venezuelan tensions brewing a notch higher … the National Oil Corporation in Libya refusing to start production at the El Sharara field,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told Reuters.
As well, stability of Nigeria’s crude production is unsure after as many as 39 people were killed in election violence over the weekend.
On Monday, Goldman Sachs analysts said “the near-term outlook for oil is modestly bullish over the next two to three months,” but they added the outlook for later in the year is weaker because of rising US exports and an “increasingly uncertain economic, policy and geopolitical backdrop.”