Oil drops after Trump raps OPEC for very high prices

‘Artificially high’

LONDON, April 21, (RTRS): Oil prices fell on Friday after US President Donald Trump criticised OPEC and said oil prices were artificially high, but they were still set for a weekly gain.

Brent crude oil futures were at $73.01 per barrel at 1357 GMT, down 77 cents from their last close. US West Texas Intermediate crude futures were down 56 cents at $67.73 a barrel.

“Looks like OPEC is at it again,” Trump wrote in a post on Twitter.

“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!”

The United States cannot legally influence oil other than through releasing oil from its strategic reserves which it has done occasionally, most recently last year in the wake of Tropical Storm Harvey.

“Are doing our role to correct the market and the market, as we said, is not yet balanced,” UAE energy minister Suhail al-Mazrouei said in response to the tweet, adding that prices were not artificially high.

OPEC Secretary-General Mohammad Barkindo said members were friends of the United States and have a vested interest in its growth and prosperity.

Both contracts had been trading in positive territory before Trump’s tweet.

Brent and WTI hit their highest levels since November 2014 earlier this week, at $74.75 and $69.56 per barrel respectively, buoyed by a tightening market, higher demand and geopolitical risks.

Target

Saudi Oil Minister Khalid alFalih said OPEC and its allies were still far away from reaching their target and that a drawdown in oil inventories needed to continue.

OPEC and its allies are curbing oil production until the end of the year, helping push up prices.

“Even if OPEC were to reach its target of reducing oil inventories to their recent five-year average by the next official June meeting, Saudi Arabia is driving a strong agenda to maintain cuts for the balance of 2018,” BNP Paribas global head of commodity market strategy Harry Tchilinguirian told the Reuters Global Oil Forum.

Firm demand was also giving prices a floor.

“Global oil demand data so far in 2018 has come in line with our optimistic expectations, with Q1 2018 likely to post the strongest year-on-year growth since Q4 2010 at 2.55 million barrels per day,” US bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC’s supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

“A supporting factor is the geopolitical risk premium, related to potential new US sanctions on Iran,” UBS analyst Giovanni Staunovo said.

Gold prices eased on Friday and were on track to end the week lower as the dollar advanced on expectations of higher US interest rates and the view that global political and security risks were easing.

Spot gold was down 0.6 percent at $1,333.66 an ounce by 1408 GMT, while US gold futures fell 0.7 percent to $1,339.20 per ounce. Spot gold is heading for its first weekly decline this month.

Jitters

Market jitters over Western missile strikes in Syria that provided some support to gold this week eased, while the geopolitical outlook on the Korean Peninsula brightened as US President Donald Trump said on Wednesday he hoped a summit with North Korean leader Kim Jong Un would be successful.

“Of course, the geopolitical risks are still high compared to the beginning of the year but it seems like they are slightly lower than a few days ago so prices have come off the boiler a bit,” Capital Economics commodities economist Simona Gambarini said.

Gold is often used as safe haven in times of uncertainty. Adding further pressure on bullion, a US central banker said the Federal Reserve should keep raising interest rates this year and next to keep the economy from overheating and financial stability risks from rising.

Higher rates dent the appeal of non-interest yielding bullion while lifting the dollar, in which it is priced.

The dollar index gained 0.4 percent against a basket of major currencies.

Investors were also relieved that no new US demands on trade came out of a summit between Japanese Prime Minister Shinzo Abe and Trump.

“The uncertainty over geopolitical risk and trade war tension has moved to the back burner this week and has made for a less compelling argument in the gold market,” APAC trading head at OANDA Stephen Innes said.

“Traders are rehashing old topics amidst reasons to stay long into the weekend, but drawing few if any conclusions.” Also, the relatively optimistic backdrop in the United States should support the Fed in raising interest rates at least twice more this year, traders and analysts have said.

Among other precious metals, spot silver was down 0.5 percent at $17.12, after hitting a more-than 2-1/2-month high at $17.35 in the previous session.