Oil Prices Drop On US-China Trade War, Saudi Production Boost

06 July, 2018, 20:24 | Author: Martin Tyler
  • Oil prices climb on tightening US market

Paradoxically, U.S. President Donald Trump, with one eye on the U.S. driving season ahead of the U.S. 4 of July holiday, has been grumbling about high oil prices and on Jun.30 tweeted that he had directly asked Saudis to open the taps to make up for the shortfall. "Please stop this method", the Iranian oil ministry's news agency, SHANA, quoted Kazempour as saying.

"The responsibility of paying unnecessary prices for oil by all consumers of the whole world, especially in United States gas stations, is exclusively upon your (Trump's) shoulders and the price of over $100 per barrel is yet to come", Kazempour Ardebili told Reuters.

Mr Trump on Wednesday accused the Organisation of Petroleum Exporting Countries (OPEC) of driving up fuel prices.

OPEC, together with a group of non-OPEC producers led by Russian Federation, reduced output in 2017 to prop up the market.

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An additional fact to consider: Tariffs would make US oil uncompetitive in China.

Oil prices have gained over three per cent since Opec and allies announced on June 22 to raise output to meet production caps set in 2016. Trump seems to want to have his cake and eat it; he wants to cut Iran's oil export to zero and keep the price of gasoline at a moderate level.

"If Trump continues to believe that OPEC are not doing enough, we would not rule out an SPR (Strategic Petroleum Reserve) release from the USA, or possibly even export restrictions on petroleum products", ING said in a note.

OPEC together with a group of non-OPEC producers led by Russian Federation started to withhold output in 2017 to prop up prices.

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Brent crude LCOc1, the global benchmark, was down 83 cents at $76.56 a barrel by 1403 GMT.

Some experts have warned that prices could rise to more than $90 per barrel moving forward. Many coutries have not committed to the United States ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.

A USA government report also weighed on prices this week, showing crude stockpiles rose by 1.3 million barrels, while analysts had forecast a decline. However, the worldwide oil body's spare supplies are limited and "will not be enough if supply is additionally reduced by outages elsewhere", the bank said. At this time, there may not be enough spare capacity to cover the losses from Venezuela and Libya.

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