U.S. President Donald Trump has taken a leaf out of OPEC’s ‘oil price jawboning’ playbook and on several occasions this year, he single-handedly managed to drive down the price of oil by tweeting outright calls on the cartel to increase production and reduce oil prices.
Saudi Arabia, OPEC’s biggest producer and de facto leader, has had years to master the art of jawboning the oil market by carefully and timely dropped comments by sources and officials here and there.
The Saudis and President Trump, however, have quite different views on where oil prices should be. Saudi Arabia is said to be aiming for at least a $70 a barrel Brent Crude price, while it is this price threshold that appears to trigger President Trump’s ‘too high oil prices’ tweets directly calling on OPEC to have those prices down.
The Saudis and President Trump have been driving oil prices in opposite directions with their comments, suggesting that oil will continue to be stuck in a price band of between $60 and $75 per barrel Brent, Reuters’ Alex Lawler argues.
Every time oil prices slump too much for several days, there’s always an unnamed Saudi official/source to try to assure the market that the Kingdom is and will be doing “whatever it takes” to rebalance the market.
Then every time prices top $65, not to speak of $70, President Trump is right there on Twitter, accusing OPEC of manipulating oil prices, demanding increased production, or claiming that OPEC has promised him they will act to keep prices down.
Over the past year, the U.S. president has often targeted OPEC on Twitter with direct calls on the producer group to “increase the flow of Oil” or to “take it easy” with the production cuts, because, President Trump has said, “oil prices are too high.”
At the end of February, with Brent Crude above $65, oil prices turned sharply lower on February 25, after President Trump took to Twitter again to criticize OPEC and rising oil prices, tweeting: “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!”
Two months later, on April 26, the day after Brent Crude briefly topped $75—its highest price so far this year—President Trump told reporters that he “called up” OPEC and told the cartel that they have to bring gasoline prices down. And this remark sent oil prices tumbling.
“The gasoline prices are coming down. I called up OPEC. I said, ‘You got to bring them down. You got to bring them down.’ And gasoline is coming down. We’re doing great,” President Trump said.
“Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement,” President Trump tweeted later on the same day, but neither Saudi Arabia nor anyone else at OPEC appeared to have spoken to the U.S. president.
Oil prices have eased (a lot) off April highs in recent months, and President Trump stopped calling out OPEC for manipulating oil prices and keeping them artificially high.
In recent months, the U.S. president did much more to depress oil prices by escalating the trade war with China than attacking OPEC. The return of a full-fledged trade war exacerbated already solid fears on the market that global economy and oil demand growth will take a hit from the trade spat fallout.
President Trump’s policy tweets are currently focused on the Chinese goods tariffs and on attacking the Fed for acting too little too late in cutting interest rates for the first time in a decade.
Despite a delay in some tariffs, there’s currently no end in sight to the trade dispute, while markets, including the oil market, took a heavy beating (again) on Wednesday amid growing signals in the U.S. and global economy that a recession could be looming.
Now it’s Saudi Arabia’s turn to have an official, source, or even its Energy Minister Khalid al-Falih reiterate that the Saudis are and will be doing whatever it takes to bring the market back to balance.
By Tsvetana Paraskova for Oilprice.com
