TRUMP’s OIL WAR?
After trade war, the US president is ratcheting up tensions with Opec
President Donald Trump’s assertion that Organisation of Petroleum Exporting Countries (Opec) is propping up oil prices amid oversupply and an excess of floating storage has a problem: it’s only half true.
While Opec has been curbing supply in a successful bid to revive oil prices, the group’s success means that there’s no longer a global glut of oil.
“Looks like Opec is at it again,” Trump said in a Twitter post. “With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”
Since January 2017, Opec and other nations led by Russia have been slashing supply. Opec’s compliance with the agreement reached a record 164 per cent last month, and non-Opec adherence gained to 85 per cent, according to Bloomberg calculations.
The partners have been meeting in Jeddah, Saudi Arabia, this week to discuss furthering their cooperation after the deal expires at the end of this year.
The amount of crude oil in floating storage globally has declined to 40.7 million barrels as of April 13, from 97.2 million barrels at the end of 2016 — a 58 per cent drop — according to data from Vortexa Ltd.
In addition, the curve for Brent crude has moved to a market condition called backwardation — when near-term contracts are more expensive than those at a later date — indicating that there’s not an oversupply. Oil inventories in developed nations are just 30 million barrels above their fiveyear average, the measure that Opec is using to gauge whether markets are balanced, the Parisbased International Energy Agency said in its latest market report this month. That’s down from more than 300 million barrels when the group started its cuts.
In recent weeks oil analysts have pointed to the fact that the diminished glut has reduced a buffer for the market, meaning that any geopolitical events — such as the renewal of US sanctions on Iran — would have a more dramatic effect on oil prices.
Trump has until May 12 to determine whether to re-impose those measures. — Bloomberg
“With record amounts of oil all over the place, including the fully loaded ships at sea, oil prices are artificially very high! Not good, and it will not be accepted! Donald Trump, US President
“We are doing our role to correct the market, and the market, as we said, is not yet balanced and I think this group has a job to do. Suhail Mohamed Al Mazrouei, UAE Energy Minister
“I have not seen any impact on demand. Reduced energy intensity and higher productivity shows there is a capacity to absorb higher prices. Khaled Al Faleh, Saudi Energy Minister
“The Declaration of Cooperation entered into by 24 producing countries has not only arrested the decline but rescued the oil industry Mohammad Barkindo, Opec Secretary-General
jeddah — Saudi Energy Minister Khaled Al Faleh said on Friday the global market has the capacity to absorb higher oil prices, drawing a swift reaction from US President Donald Trump who accused Opec of inflating prices.
Faleh’s statement at a meeting of oil producers in Saudi Arabia came as crude hit the highest level in more than three years.
“Looks like Opec is at it again,” Trump tweeted.
“With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”
Oil has rebounded to over $70 a barrel, after prices crashed to as low as $26 in January 2016.
“I have not seen any impact on demand with current prices,” Faleh told reporters, ahead of a ministerial committee for Opec and non-Opec producers.
“Reduced energy intensity and higher productivity globally of energy input leads me to think that there is the capacity to absorb higher prices,” he said.
The ministerial committee said Friday that crude inventory levels have been reduced but were still higher than desired.
We are doing our role to correct the market and the market as we said is not yet balanced Suhail bin Mohammed Faraj Faris Al Mazrouei, UAE Minister of Energy and Industry
Stockpiles were at 2.83 billion barrels, down from their peak of 3.12 billion barrels two years ago, it said in a statement.
UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei said on Friday oil prices were not artificially high and Opec and non-Opec countries were playing their role to correct the market. Al Mazrouei made his remarks after being asked to comment on US President Donald Trump’s tweet earlier on Friday in which he said oil prices were artificially very high.
“I am not going to comment on what the president said, but definitely we are doing our role to correct the market and the market as we said is not yet balanced and I think this group has a job to do and we are continuing to do our job,” Al Mazrouei said. “We are doing our role to correct the market.. there are many things affecting the market, not just supply and demand,” including geopolitics that are beyond Opec’s control, he said.
Opec Secretary-General Mohammed Barkindo said the pact between Opec and non-Opec countries to cut production had halted the collapse in global oil prices, and said the group was a friend of the US with an interest in its prosperity.
Output cuts “not only arrested the decline but rescued the oil industry from imminent collapse and is now on course to restore stability on a sustainable basis in the interest of producers, consumers and the global economy,” Barkindo said.
Russia, Saudi Arabia’s most important ally in the production cuts, gave its backing to continuing the cuts until their end-2018 expiry. There’s no obligation to stop just because the pact’s initial goal — stockpiles in industrialised nations back in line with the five-year average — is at hand, said energy minister Alexander Novak.
Novak also rejected Trump’s accusation, while also arguing the group’s production cuts have helped US producers to boost output. “The deal helped to restore the industry of Texas,” he said in an interview with Bloomberg television. Analysts believe Saudi Arabia, the world’s top crude exporter, aims to see much higher oil prices to overcome its domestic financial difficulties and raise the valuation of state oil giant Aramco ahead of a planned 5 per cent IPO. — AFP/Bloomberg /Reuters