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Trump fosters market uncertainty and then complains about it

The predictability of Trump’s unpredictability is truly predictable

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

Oil prices are on the rise, and Trump is not happy about it. This past Wednesday, Trump took to Twitter to express his displeasure with the rise in the price of oil, a price increase that is partly due to the sanctions that he himself imposed on the oil producing nation of Iran.

While the oil market can expect that the output realized from Iran will go down, a certain amount of uncertainty regarding the supply of oil throughout the remainder of 2018 remains. With a certain amount of supply exiting the forecast going forward, via less oil being supplied by Iran, and the uncertainty of the exact quantity being supplied over the course of the next few months, together with uncertainty over how Trump’s policies are going to affect it, oil prices are therefore increasing.

Associated French Press reports:

Just nine days before a big OPEC meeting, US President Donald Trump joined the oil-market fray on Wednesday, blaming the group for high prices.

“Oil prices are too high, OPEC is at it again. Not good!” the US president said on Twitter.

Trump’s grousing follows reports suggesting the oil exporters group was already planning to open the spigots, an outcome the International Energy Agency hinted at in its monthly report released earlier Wednesday.

“Statements by several parties suggest that action in terms of higher supply could be on the way,” said the IEA, which represents the US and other oil-consuming nations.

The IEA suggested the June 22 OPEC meeting in Vienna would need to boost output because of a political crisis in Venezuela that has pinched petroleum output and Trump’s decision to exit the Iran nuclear pact, which is expected to result in lower production from the Middle Eastern country.

Under one scenario weighed by the IEA, output from Venezuela and Iran by the end of 2019 could be 1.5 million barrels per day lower than it is today.

“To make up for the losses, we estimate that Middle East OPEC countries could increase production in fairly short order by about 1.1 mb/d and there could be more output from Russia on top of the increase already built into our 2019 non-OPEC supply numbers,” the IEA said.

OPEC flows were already higher in May, led by Saudi Arabia, the IEA said, adding that the oil kingpin was still in compliance with the Vienna deal caps.

Citing “people briefed on the discussions,” Bloomberg on Wednesday said Saudi Arabia had floated several oil output hike plans to fellow cartel members.

On the sidelines of the opening match of the World Cup on Thursday, President Vladimir Putin and Saudi Crown Prince Mohammad bin Salman will meet to discuss oil policy, Bloomberg added.

– Higher gasoline prices –

Trump’s complaints about OPEC come amid expectations of a more costly US summer driving season. A gallon of regular gasoline is currently $2.91, up 25 percent from the year-ago level.

Analysts attribute the rise in prices in part to OPEC’s action to defend prices.

OPEC and non-OPEC producers struck a deal in late 2016 to trim production by 1.8 million barrels per day to reduce a global glut that had sent prices crashing. Key producers, including Saudi Arabia and Russia, have reaffirmed the deal since then.

But Matt Smith, director of research at ClipperData, said Trump himself is responsible for some of the pressure due to the decision to exit the Iran deal.

“It’s confusing why the president would come out with a statement like this now,” Smith said. “The real catalyst for the recent rise in prices is the sanctions on Iran.”

US oil benchmark West Texas Intermediate for July delivery finished up 28 cents at $66.64 a barrel on Wednesday, while European benchmark North Sea Brent oil gained $1.06 to $76.74 a barrel.

While the world turns its eyes on the Vienna OPEC meeting, oil market watchers are also monitoring activity in Trump’s home market, where higher prices are feeding more production of American shale oil.

US production of oil came in at 10.9 million barrels per day last week, according to data released Wednesday by the US Energy Information Administration, up nearly 17 percent from the year-ago level.

OPEC itself spotlighted US output in its own monthly report on Tuesday, citing the growth of non-OPEC supply as one of several question marks hanging over the situation.

Various sources show that “considerable uncertainty as to world oil demand and non-OPEC supply prevails,” OPEC said, leading to a wide range of estimates for the remainder of 2018.

The Trump effect on markets is not merely how his present policies are going to shape market conditions, but whether he will even stick with them, and what he may or may not do going forward, as Trump reshapes market conditions frequently, sometimes just through a tweet. Meanwhile, Trump complains about it, of course, on Twitter. The predictability of Trump’s unpredictability is truly predictable.



The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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John R Balch Jr
John R Balch Jr
September 5, 2018

HAY Trump, Gas always goes up in the summer time because people are traveling more and going on vacations. Not like you who has everything handed to you.

tibetan cowboy
tibetan cowboy
September 5, 2018

I believe all of Venezuela’s oil is now being sold to China, with China also assisting Venezuela with loans and expertise in their infrastructure developments (ports, pipelines, shipping, etc.). Venezuela and China are not using the petro dollar for business anymore. Venezuela has developed their own trade system with bitcoin currency. China is now using their gold-based Yuan more and more as they dump dollar based trading, a major international movement that is growing away from dollar denominated oil business. This loss of dollar trade will contribute significantly to the economic crash and depression on the American horizon.

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