Trump may get his wish after all.
One day after the US president issued an implicit warning to remove military support for “middle eastern” nations, tweeting that “they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!”…
… Reuters reports that during tomorrow’s meeting of oil producing states, OPEC and Non-OPEC states may boost production by half a million barrels per day:
OPEC AND NON-OPEC COUNTRIES DISCUSSING POSSIBLE PRODUCTION INCREASE BY ANOTHER 500,000 BPD – SOURCE FAMILIAR WITH DISCUSSIONS
In kneejerk response, Brent pared all of its intraday gains and dropped as low as $78.64, while WTI last traded higher by 23c at $70.55/bbl, also sliding sharply from its $71.80/bbl high.
Earlier in the day, Brent rose above $80 a barrel mark on Friday ahead of a meeting of energy officials who are meeting this weekend to discuss output policy as US sanctions on Iran’s oil exports already begin to restrict supplies. Brent approached four-year highs, rising $1.42 a barrel to $80.12.
On Sunday, OPEC and non-OPEC states will gather in Algeria on Sunday to talk about raising output to offset any impact from a drop in Iranian exports, which has boosted oil prices and prompted the abovementioned angry tweet from Trump.
Among the key concerns ahead of the gathering is how severe the drop in Iranian barrels will be and how much Saudi Arabia, Russia and other big producers will be able to raise their output to compensate for the losses, amid concerns about available spare production capacity, which acts as a buffer should prices rise too high.
“In our view, near-term spare capacity is effectively maxed out,” said analysts at Energy Aspects. They said Saudi Arabia and Russia may not be able to accelerate production much further any time soon even if they signal that they are prepared to unleash more volumes on the market.
It now appears that a half a million boost in production, driven most likely by Saudi Arabia which will be delighted to take over Iran’s market share, much to Tehran’s fury, will be one such response.