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Oil Pulls Back As Trump Claims Saudi Arabia Will Further Increase Supply

July 2, 2018 at 15:20 by Matt Jackson

Oil has retraced some of its recent rally, following the latest tweet from US President, Donald Trump, stating that he had asked Saudi Arabian officials to increase their oil output to “maybe” 2 million barrels per day; a request that King Salman apparently agreed to. However, gains have been held back by a rapid retort from Iran, stating that if Saudi Arabia did agree to that deal, it is tantamount to the oil producer walking away from the OPEC deal. US officials have also been forced to retreat from the President’s position, saying that King Salman had indicated that Saudi Arabia has the spare production capacity, but that they would only release it to the market to ensure market stability and with the agreement of their partners.

There has been an ongoing feud between the USA and Saudi Arabia, over oil prices, for several months. In the past, Trump has accused OPEC of artificially controlling prices, while Saudi Arabia has said that they would like to see oil prices continue to increase until they reach $100 or more. The USA has also imposed sanctions against Iran and Venezuela that effectively prevent the countries from being able to sell their oil supply, disrupting global supply. Because of this disruption, Trump has unoficially asked Saudi Arabia if they would be willing to increase their output. During a meeting of OPEC nations, and Russia, at the end of last month, the group did agree to increase production but only to previously agreed levels.

The latest round of the dispute saw Trump tweet on Sunday:

However, soon after the tweet, Iran’s OPEC governor, Hossein Kazempour Ardebili said that “there is no way one country could go 2 million barrels a day above their production allocation unless they are walking out of OPEC.”

Since the tweets were published, US officials have reported that King Salman actually said that they had the spare capacity but would only be willing to provide it to the market with agreement from their partners and to stabilise the market.

Although the initial fears surrounding Trump’s tweet have basically been rebuffed, the market has still responded. WTI crude fell 0.66% to $73.66 while Brent crude fell 1.88% to $77.74.

If you have any questions and comments on commodities today, use the form below to reply.

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