Lower oil prices now

Marco Green
September 20, 2018

Trump has earlier called for members of the Organisation of the Petroleum Exporting Countries - primarily cartel kingpin and United States ally Saudi Arabia - to raise their production, and warned importers to stop buying oil from Iran or face USA sanctions.

Why does Trump so badly want low oil prices?

The Republican president has lashed out at the Organization of Petroleum Exporting Countries over the past several months, demanding price cuts and output increases in targeted tweets.

Iran and Venezuela are under tough USA sanctions which have slashed their oil exports and triggered a currency crisis.

The Asian recovery in WTI (oil futures on NYMEX) got sold-off into the $ 70 barrier in the European morning, as markets turned cautious ahead of the weekly U.S. crude stockpiles report due to be published by the Energy Information Administration (EIA) later on Wednesday.

The so-called 'OPEC+' coalition meets on Sunday in Algeria to discuss how to allocate that 1 million bpd increase within its quota framework. While Saudi Arabia and Russian Federation have recently boosted output to compensate, it's unclear whether they're willing or able to offset all the losses from Iran.

Two sources said the meeting could produce a recommendation on dividing the increase, as most participating countries would be represented.

He said the agreement reached in 2016 between OPEC member states and allied producers top cut output "is in tatters", and the JMMC meeting has no authority to impose a new supply deal.

A separate OPEC source said: "To make a decision, you need to have all the ministers".

While the Algiers meeting to be held on September 23 is to be attended by most major oil producers except Iran, it will be just a committee review.

US sanctions on Iran's oil exports come into force on November 4 and many buyers have already scaled back Iranian purchases. Falling Venezuelan output and unplanned outages elsewhere will also keep the supply-demand balance tight.

Trump has specifically called on Saudi Arabia, OPEC's largest producer, to raise output, saying that it should help the United States lower fuel prices since Washington is aiding Riyadh in its struggle against Iran. The Brent benchmark fell 43 cents to $78.97 per barrel, while the US Texas Intermediate grew 9 cents to $71.21.

While some producers face supply restrictions due to infrastructure constraints or a desire not to be seen as flooding the market, others are quietly boosting exports to Asia, the sources said.

Saudi officials believe there is insufficient oil demand so far to justify raising Saudi output much beyond the roughly 400,000 bpd that it has pumped above its 10 million bpd target, OPEC and industry sources told Reuters.

Does the U.S. really protect the Middle East?

OPEC Secretary-General Mohammad Barkindo, meanwhile, warned this week of underinvestment in the global oil industry.

The change in the kingdom's view on prices coincided with some intense oil diplomacy.

As oil prices remain high, prices for gasoline in the U.S. are growing.

Other reports by Click Lancashire

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