Advertisment Trump’s Oil Diplomacy Won’t Fix Supply Fears amid Iran Squeeze | Iran Energy News Skip to main content
IRAN Energy News Agency
Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel

Trump’s Oil Diplomacy Won’t Fix Supply Fears amid Iran Squeeze

Trump tweeted on Saturday that he’d gotten an agreement from Saudi Arabia’s King Salman to boost output.

 

U.S. President Donald Trump’s weekend of oil diplomacy doesn’t change the underlying dynamic of a crude market that’s swiftly seeing demand threaten to overtake supplies, analysts said on Sunday.

Trump’s tweet suggesting that Saudi Arabia had agreed to pump an additional 2 million barrels a day may drive crude prices down initially when trading resumes at 6 p.m. New York time on Sunday, said Phil Flynn, a senior market analyst at Price Futures Group Inc. in Chicago.

Yet a price boost could be short-lived, Flynn said. The White House and the Saudi Press Agency each released statements after Trump’s tweet saying the sides had discussed how to compensate for potential shortages in oil producing countries, but neither referred to a specific target. Meanwhile, rising demand and supply disruptions still support higher prices, Flynn said.

While hopes for a Saudi increase could cut $2 to $3 a barrel off prices, “demand for oil will start to go back up again and the market will quickly absorb those barrels,” Flynn said by phone. “Then you’ll be in a situation where you’ve essentially removed most of the spare production left in the globe.”

Last week, hedge funds cut bets on falling West Texas Intermediate crude prices by 60 percent, the most in data going back to 2006. The shutdown of an oil-sands upgrader in Canada, tensions in Libya, Venezuela’s economic collapse and a U.S. call for allies to stop buying from Iran have all dragged down the global crude market

A tighter inventory picture in the U.S. is also keeping crude prices elevated. Stockpiles tumbled the most since September 2016 last week, production increases paused and the oil rig count has edged lower.

Brent crude, the global benchmark price, settled just below $80 a barrel, nearing levels last seen in 2014. WTI, the U.S. benchmark, closed at $74.15 a barrel on June 29, up almost $6 over the previous week

Trump tweeted on Saturday that he’d gotten an agreement from Saudi Arabia’s King Salman to boost output. The more ambiguous statements that followed mirrored previous comments and are unlikely to ease market jitters, said Andy Lipow, the president of Lipow Oil Associates LLC in Houston.

Trump’s administration in early May said that it would renew U.S. sanctions on Iran and has sought to reduce other foreign buyers’ purchases of Iranian crude.

“It doesn’t change the dynamic,” Lipow said by telephone. “The market perception is that supplies are tight and will get tighter with the loss of Iranian oil. It may not be until we see Brent in excess of $80 that we actually see the Saudis react.”

 

Join us on Telegram Channel."Energy Today"
Google +
Twitter
Facebook
Google Translate
Instagram
Digg
Telegram
Blogger
Linkedin
Pinterest

Add new comment

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Fill in the blank.
49