Some of the largest oil producers have voluntarily agreed to cut back on oil production in an effort to dial back on stockpiles of stored crude.
OPEC senior officials, include the Russians, among others, on Friday expressed their satisfaction with the deal that was implemented in 2016 with a view to limit production.
The pact, which also involves non OPEC producers, have committed to cutting 2% of global oil production.
The production cut has since successfully taken international oil prices to a level over $70 a barrel. US President Donald Trump took to Twitter to give his two cents about the pact, and its geopolitical effects.
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
Russia is committed to sticking with the deal until it expires at the close of 2018, when Russian producers intend to obtain a resumption of prior production levels.
In response to Trump’s tweet, Saudi Arabian Oil Minister Khalid al-Falih told reporters that “there is no such thing as an artificial price.”
But while Trump slams the concept of an artificial oil price and geopolitical impacts thereof, his own diplomacy is set to have some of the largest impacts on oil prices and availability in coming months, due to his policies relevant to Russia, Iran, Syria, and Venezuela, which are some of the world’s leading oil producers.
With the Iran Nuclear deal up for renewal in May, and Trump’s threat to scrap the deal over its ‘unfairness’, the possibility of sanctions limiting the supply from a major producer is a source of concern for the oil market.
Additionally, Trump’s air strike on Syria is an additional anxiety as the possibility of further Middle Eastern intervention worries the market. Moreover, US supported unrest in Venezuela continues to curb its production.
Furthermore, even more US sanctions against Russia could also adversely impact the oil supply. Each of these supply concerns affects the supply of oil, which is one of the biggest factors impacting the price. Therefore, as far as ‘artificial high prices’ are concerned, the US’s unnecessary geopolitical interventions are set to have some of the largest impacts on the market’s supply, which could unnecessarily result in artificially higher oil prices over supply concerns.