Oil prices slipped yesterday following President Donald Trump tweet urging the Organisation of the Petroleum Exporting Countries (OPEC) to keep crude prices lower because of the military protection the United Statesprovides for the region. USA light crude oil CLc1 was 40 cents higher at $71.52 a barrel, after rising almost 2 percent on Wednesday.
Reuters reported two weeks ago that Saudi Arabia wanted oil to stay between $70 and $80 a barrel for now, seeking a balance between maximizing revenue and keeping a lid on prices until USA congressional elections.
Opec and its allies are scheduled to gather in Algeria on Sunday to discuss how to allocate higher supply to offset the shortage of Iranian supplies.
"The OPEC monopoly must get prices down now!", Trump said.
Oil prices have increased from around $50 per barrel last September, to more than $70 per barrel today, with a rebalancing of the supply and demand disparity in the market, as well as major weather and geopolitical events playing a part.
Such technical arguments may inflame passions inside OPEC delegations, but they're drowned out by Trump's Twitter bullhorn, which was blasting loud and clear on Thursday. In April, the volume of crude oil transported by tanker and barge from the Gulf Coast to the East Coast reached the highest level since mid-2014.
"The current market betting line suggests price levels rather than global supply levels will be the key determinant on turning on the oil taps", Innes said.
Aside from the presidential tweets, pressure has been mounting on OPEC to increase production ahead of United States sanctions against Iran, which come into effect in November.
At the same time, Trump will reimpose sanctions on Iran later this year as part of his decision to withdraw from the nuclear deal, potentially removing a significant oil supplier from the market.
US sanctions affecting Iran's oil exports come into force on November 4 and many buyers have already scaled back Iranian purchases.
Crude oil prices and energy-related exchange traded funds jumped as USA oil inventories slip to a three-and-a-half year low on rising exports.
Still, many traders and analysts expect Brent to move above $80 soon. "The producers that count are producing at will" and Saudi Arabia and Russian Federation are likely to boost output further, he said.