Trump’s tweet makes Opec cuts even more likely

washington — Typical. You go to the trouble of organising a big gettogether in Abu Dhabi to help shore up oil prices, complete with press conferences and the usual nodand-a-wink guidance. And what happens? US President Donald Trump rebuts it with a tweet.

There are several noteworthy aspects to this latest official communication from the White House. It rather contradicts itself: If supply is ample enough that prices ought to be much lower than they are, then what’s the problem? Still, I’m guessing this isn’t the first time you’ve read a tweet (by Trump or anyone else) with leaky logic.

More importantly, it comes after oil prices have already dropped by about $15 a barrel, almost a fifth, over the past month or so to around $70. Meanwhile, the midterm elections are over. In the run-up to

Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!

@realDonaldTrump

those, Trump tended to tweet about oil and Opec when prices were moving sharply higher or were closer to $80.

Trump may well have simply been reacting to news that Saudi Arabia, along with fellow Opec members and a coalition of other oil exporters, is likely to cut production soon. Even though oil prices have been coming down, why not push for even steeper declines with a few choice characters?

If anything, though, the tweet could make it even more likely that cuts happen.

The drop in oil prices reflects surging supply in the US as well as intimations of weakness in demand, particularly in the gasoline market. Opec has struggled to reimpose its authority completely in the face of shale oil’s resilience, and there were very strong hints at its latest gathering that demand estimates will be revised lower again (the organisation’s next monthly report is due on Tuesday).

The conflicting needs of the group’s members and partners, along with the changing geopolitical backdrop and concerns about long-term demand for oil, have rendered Opec’s blunt tools much less effective.

Talking up the market is one of those tools, and it wasn’t doing much for oil prices on Monday anyway, even before Trump’s retort undercut it. One of the features of the recent slide in oil prices has been the withdrawal of long money from the futures market.