Hail to the tweet! President Donald Trump is calling out OPEC and telling them now is the time to lower prices. The tweet this time had less of an oil price impact from previous tweets, as many are starting to realize OPEC can’t do much. The President tweeted that “The OPEC Monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two-way street. REDUCE PRICING NOW!”
The slight gains in U.S. equities on Monday failed to influence Asian investors as trade fears and the Renminbi’s slide continued to drive risk aversion. This sharp depreciation in the Chinese currency is worrying investors. In August 2015, the U.S. dollar/Canadian dollar (USD/CNY) currency pair appreciated from 6.21 to 6.44, a two-day gain of 3.85%.
Oh, say can you tweet, by the dawn’s early light? The global oil markets are still rolling after President Donald Trump tweeted that maybe the Saudis had agreed to increase output by as much as two million barrels to help replace Iranian supply that the Trump Administration wants to see at zero by early November.
It has been an interesting first half for 2018. Economic fundamentals and politics took center stage as both fought for market influence. The Federal Reserve is in tightening mode as growth and inflation trended higher, while the trade war between the U.S. and the rest of the world particularly with China and the E.U. intensified further.
Crude oil prices have managed to make back a good chunk of their initial losses after gapping lower following an eye-catching tweet from President Donald Trump at the weekend. The U.S. President claimed that Saudi Arabia King bin Salman had agreed to his request to increase crude oil output by 2,000,000 barrels (per day?) to compensate for what he called the “turmoil and dysfunction in Iran and Venezuela.”
So, President Trump is using his leverage with the Saudis saying you must replace Iranian oil because we have got your back against your nemesis. The Saudis, of course, must look like any move they make is within the boundaries OPEC and Russia has set. Iran Oil Minister Bijan Namdar Zanganeh said any production increase above limits agreed to by OPEC would “breach” the deal, according to a letter he sent to OPEC President Suhail Al Mazrouei and distributed by the Iran Oil Ministry’s news service Shana. OPEC should reject the U.S. call for a production increase which is “politically motivated against Iran,” he said, as reported by Bloomberg.
With the Trump Administration working toward zero Iranian exports by November, Libyan oil supplies at risk due to clashes with militias, and crashing supply from Venezuela, reports of tightening U.S. supply is keeping oil on edge. Crude oil price continued its drive, hitting $74 a barrel for the first time since that fateful OPEC meeting in November 2014.
The global oil market supercycle that we predicted would happen a few years ago is becoming increasingly clear to the crude oil market. It is hard to ignore what is happening when the data in the United States and around the globe is seeing the seeds of a bull market in energy that will last for years.
Last week, West Texas Intermediate crude oil traded down to $63.70 per barrel intraday, the same level it was trading at in early January. Much like the US stock market, prices had traveled both higher and lower in the first six months of the year, but was trading essentially unchanged from the level seen on the first trading day of the year.
Financial markets are once again in risk aversion mode on Wednesday, as investors continue to take shelter from the ongoing trade spat. There hasn’t been much progress – positive or negative – in recent days although U.S. Treasury Secretary Steve Mnuchin did deny reports that the country is looking to block investment from China in U.S. tech, instead claiming there will be a statement aimed at all countries trying to steal technology.