Oil prices fell Thursday, slowing a recent wave of price increases, after a tweet from US President Donald Trump called for OPEC to “get prices down now!”.
Oil prices expected to be in $80/barrel range as US sanctions cut Iranian export supply
Oil prices fell on Thursday after a tweet from US President Donald Trump called on the Organization of Petroleum Exporting Countries to “get prices down now”.
By 1 p.m., EDT, benchmark Brent slipped 60 cents to $78.32/barrel and US West Texas Intermediate fell 37 cents to $70.40/barrel. The Canadian Crude Index dropped $1.72 to $37.72.
Oil prices rose earlier this week as the market braced itself for expected crude supply shortages due to the reimposition of the Trump administration’s Iran crude exports sanctions.
“We’re stuck in a range here,” Tariq Zahir, managing member at Tyche Capital Advisors told Reuters. He added that oil prices are supported by the looming sanctions, and at the same time are under pressure from a potential drop in Chinese demand due to the escalating trade war between Washington and Beijing.
OPEC and participants in the cartel’s supply cut agreement are scheduled to meet on Sunday in Algeria. The group will discuss meting out production increases amongst participants to make up for the reduction of Iranian crude availability.
According to Reuters, it is unlikely the participants will agree to a rise in crude output even though pressure is mounting to avoid a price spike.
On Thursday, US President Donald Trump tweeted “We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!”
Zahir told Reuters that in the range-bound market, Trump’s tweets may have a slight impact on oil prices.
“The last thing that he is going to want to have happen is diesel prices and oil prices hitting highs when people are going to the voting booth,” Zahir said. He added that he expects to see more of these tweets as the US midterms near.
Despite Trump’s online techniques to keep oil prices down, many traders and analysts expect Brent to top $80/barrel soon.
“Brent is definitely fighting the $80 line, wanting to break above,” SEB Markets chief commodities analyst Bjarne Schieldrop told Reuters. “But this is likely going to break very soon.”
US sanctions on Iranian crude exports are in full force on Nov. 4. A number of Iran’s crude customers have already cut back their purchases and are searching for other suppliers. But, at this time, it is unclear if OPEC’s Saudi Arabia and Iran as well as Russia are capable of making up for the losses.
At the Global Oil Forum, BNP Paribas oil strategist Harry Tchilinguirian told Reuters: “$80-per-barrel Brent is a psychological level, and unsurprisingly, as we approach it, it gets sold into as some market participants take profit.”
“As more evidence gathers that Iranian oil exports are heading sharply down, the more emboldened the oil market is likely to be to test, and breach this level.”
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