Fuel to the flames

Afew weeks ago Donald Trump, using his favoured form of communication, tweeted: “Oil prices too high. Opec is at it again. No good.” At the time, a barrel of crude had risen above $70. Now it is fast approaching $80 with the market analysts predicting the possibility of $90 when renewed US sanctions against Iran kick in.

However, it is not only Opec pushing up oil prices but Mr Trump’s own policies. Once again we are seeing the geopolitical power of oil. Iran is the great enemy of Saudi Arabia and the latter is coordinating energy policy with Washington. Mr Trump called King Salman at the weekend and claimed to have secured the desert kingdom’s agreement to boost output by two million barrels a day. Not for the first time, though, this turned out not to be entirely accurate. The White House later said the king merely pointed out that Saudi Arabia had spare capacity of up to two million barrels and would prudently use this “if and when necessary to ensure market balance and stability, and in coordination with its producer partners”.

The Saudis are anxious to please Washington by increasing production, but they would also like to see prices remain high, not least as they continue preparations for the stock market listing of Aramco in what would be the world’s biggest flotation. Russia, too, will benefit from a combination of higher production and prices.

By withdrawing US support for the Iran nuclear deal and re-imposing sanctions, Mr Trump hopes to cut off Iran’s oil sales, crippling its economy and spurring regime change. Indeed it may. But there are wider implications that he seems not to have contemplated. Combined with the uncertainty engendered by America’s threat of a trade war with Europe and China, the market will be pushing up oil prices for some time yet.