Rising oil prices are now the latest target in President Donald Trump’s cross-hairs. The nation’s tweeter-in-chief complained Friday about OPEC fueling an “artificially Very High” cost for crude that he said “will not be accepted!”
So what’s behind the jump in prices? Market outcomes, like success, can claim a thousand fathers, but here’s a potential rogue’s gallery for Trump following Brent crude’s move to almost $75 a barrel last week, its highest level in more than three years:
– The Saudis: Trump’s right on this one. The world’s biggest oil exporter has signaled it wants to push prices even higher, to around $80 a barrel, as it seeks to fund the expansive (and expensive) economic agenda of Crown Prince Mohammed Bin Salman and support the valuation of state energy giant Aramco before an initial public offering. The kingdom spearheaded the successful effort by OPEC, Russia and other major producers to curtail global supply and boost prices. In a meeting this week, oil ministers signaled a willingness to see prices rise further.
– Russia: Saudi Arabia’s most important ally in cutting output has backed extending the effort through the end of this year. Meanwhile, tensions are rising between the West and the world’s largest crude producer. The U.S. and Europe announced tough sanctions on Russia in recent weeks, including limits hitting oligarchs in the energy sector, although Trump did reverse a plan earlier this week to impose more restrictions.
– The Iran deal: Fears that Trump will reimpose sanctions on Iran when the nuclear deal is reviewed, largely arising from the president’s public comments, are adding to uncertainty in the market. The Obama administration’s agreement with Iran has boosted production from the nation by more than 1 million barrels a day. A Bloomberg survey of oil-market analysts found a 50-50 chance of a sanctions “snap-back,” which could halt as much as 800,000 barrels a day of exports from OPEC’s third-largest producer within six months. Watch prices rise then.
– Venezuela’s meltdown: This OPEC member has seen its output decline amid political and economic strife. Trump has added to the pressure, with a drive to impose tough sanctions to punish President Nicolas Maduro. Among those hit by sanctions are the former chief financial officer for the state-owned oil producer, Petroleos de Venezuela SA. A cryptocurrency introduced by Maduro, based on the nation’s massive oil reserves, may also face sanctions, the U.S. has warned.
– Trade wars: Trump’s tough trade talk, and tit-for-tat tariffs between the U.S. and China, have roiled global markets and raised the specter of further restrictions, at a time when American oil and gas exports are rising. In March, the industry said a new White House levy on steel imports could increase the cost of steel for wells by 25 percent and discourage pipeline construction as well.
And about those pipelines: The Permian Basin, the heart of the shale boom, is running into shortages with labor, equipment and, perhaps most critically, pipeline capacity. The output above pipeline space could grow to almost 1 million barrels a day in the year ahead, with no significant new pipes coming online until the second half of 2019.
Pipes aren’t the only things carrying oil: The Jones Act – Section 27 of a law enacted in 1920 requires that goods transported by ship between U.S. ports be carried on vessels built and flagged in the U.S. and owned and manned by U.S. citizens. That drives up the cost of shipping U.S. crude from the Gulf Coast, for example, to refineries on the East Coast, which often use international oil instead. Arizona Republican Senator John McCain, among others, has called for the act to be annulled.
Finally, the world’s consumers can blame themselves. Global oil demand likely climbed by 2.6 million barrels a day in this year’s first quarter, the biggest year-over-year jump since 2010, Goldman Sachs Group Inc. said on Thursday. Rising consumer spending as well as cold weather in Europe and the U.S. helped boost demand, keeping Brent on track to reach $80 in the coming months, the Goldman analysts said.
Meanwhile, there’s one lever Trump could pull to tamp down oil prices: releasing crude from the U.S. Strategic Petroleum Reserve. The emergency supply currently holds about 665 million barrels, according to the Energy Department. The backup has been tapped in the past to deal with market disruptions such as Libya’s civil war and Hurricane Katrina.
Bloomberg’s Tina Davis and Laura Blewitt contributed.
-Oil pulls back from gains; OPEC says glut nearly gone – Oil prices on Thursday hit highs not seen since 2014, built on the ongoing drawdowns in global supply and as Saudi Arabia looks to push prices higher, though U.S. crude gave back gains in the afternoon to finish lower – Crude Oil OPEC glut Saudi Arabia
-Escalating Middle East Tension Could Trigger Oil Prices To Hit $100 Per Barrel – Oil prices could soon soar to $100 per barrel amid growing fear about conflict in the Middle East, according to an oil analyst for CNBC – Oil Prices $100 Barrel
– IEA: OPEC Mission Near Completion as Oil Glut Vanishes – OPEC is on the verge of “mission accomplished” in its quest to clear the global oil glut that caused the worst industry downturn in a generation – IEA OPEC Crude Oil Glut
-Is Russia Cheating On The OPEC Deal? – After three months of steady output, Russia’s crude oil production increased in March to 10.97 million bpd, the highest level since April 2017, as the top two Russian companies boosted their production – Russia Cheating OPEC Deal
-Oil price crosses $70 amid Iran deal tensions – Oil prices rose as investors saw increasing possibility that the US could withdraw from the historic Iran nuclear deal – Crude Oil price dollars 70 Iran tensions
-Is $70 oil the new normal? – The global economy is poised to cope well even if oil prices will remain at around $70 per barrel throughout 2018, energy experts said – Dollars 70 barrel crude oil shale oil
-Will oil prices remain strong for the rest of the year? – The oil inventory trajectory anchors oil prices in the short term, and the cost of bringing on the marginal barrel of US tight oil supply serves as the medium-term anchor for prices – The oil inventory trajectory anchors oil prices in the short term, and the cost of bringing on the marginal barrel of US tight oil supply serves as the medium-term anchor for prices – Crude Oil prices