After a tumultuous trading day on Monday, oil prices steadied on Tuesday after OPEC sources said the cartel is likely to carry on with its supply cut agreement despite a tweet from US President Donald Trump urging the cartel to soften its stance on supply.
Oil prices dropped over 3.5 per cent Monday
Oil prices steadied on Tuesday after falling over 3.5 per cent on Monday. An OPEC source said the cartel is planning to continue with its planned supply cuts despite pressure from US President Donald Trump.
On Monday, Trump tweeted out “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Following the tweet, oil prices slumped over 3.5 per cent.
But on Tuesday, an OPEC source told Reuters that the cartel plans to stick to its supply deal and will ignore Trump’s tweet.
By 3:07 p.m., EST, benchmark Brent crude futures climbed 59 cents to $65.50/barrel and US West Texas Intermediate crude futures were up 16 cents to $55.64/barrel.
“The market has started to realize that Donald Trump can’t tweet more oil out of the ground, or out of OPEC,” Phil Flynn, analyst at Price Futures Group told Reuters.
“OPEC really wants to get the supplies … back in line,” Flynn added.
Since OPEC began its supply cut, oil prices are up about 20 per cent. The OPEC source told Reuters that the cartel and its partners, including Russia, will continue its supply cut deal to balance the oil market until they see inventories drop to their five-year average.
“There is no doubt we will continue with our reduction as planned,” the source said.
OPEC and other participants in the agreement pledged to cut their total supply by 1.2 million barrels per day (b/d) beginning on Jan. 1 for six months.
The market also grew more optimistic the the US and China would resolve its trade dispute, also boosting prices. On Monday, Trump said he may soon sign an agreement with Chinese President Xi Jinping to end the trade war between the two economic superpowers.
Libya’s internationally recognized government said on Tuesday that it agreed with the state oil company to reopen the country’s largest oilfield, El Sharara. This announcement weighed on oil prices.