Iran tells Trump: Stop tweeting, it's driving up oil prices

Donald Trump

Saudi Arabia and Russian Federation, which led OPEC and partner countries in reaching last month's production deal, reaffirmed the agreement in statements on Tuesday, saying this will mean increasing oil output by 1 million barrels a day.

Soon after that deal was struck, Trump announced that he had done a separate deal with Saudi Arabia to increase production by "maybe up to 2,000,000 barrels". "Don't forget the one negative to the Iran deal is that you lose a lot of oil, and they [the Saudis] got to make up for it", Trump said on Fox.

Trump's tweet on Wednesday came just a couple of days before OPEC meets in Vienna, and less than a week after the oil producer's cartel agreed to increase output by as much as 600,000 to 800,000 barrels a day to the market.

OPEC together with a group of non-OPEC producers led by Russian Federation started to withhold output in 2017 to prop up prices.

Oil is trading near US$78 a barrel, holding most of a rally that saw prices rise to the highest level in more than three years after OPEC's output increase plan was overshadowed by supply disruptions in Libya, Canada and Venezuela.

Overall, however, analysts said OPEC's production policy as well as unplanned supply disruptions were now the main price drivers.

A similar situation occurred last month with two other ports and the National Oil Company has confirmed that the blockages are cutting oil production by 850,000 barrels per day, further tightening global supply.

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Last month, Saudi Energy Minister Khalid Al-Falih said OPEC would increase production by about 1 million barrels daily, though Nigerian Oil Minister Emmanuel Ibe Kachikwu said the boost would amount to 700,000 barrels each day in the second half of 2018.

Both leaders also discussed "efforts by the oil-producing countries to compensate for any potential shortage in supplies", SPA reported.

Trump's tweet triggered reaction from Iran, a founding member of OPEC, whose oil exports have been targeted by U.S. sanctions. Rising gasoline prices could create a political headache for Trump before November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the US economy. The hike in price has created difficulties for all countries especially states like Pakistan that depend heavily on oil imports.

Traders also cited chatter in the market that Mr. Trump would decide to tap the Strategic Petroleum Reserve for extra barrels of crude.

Iran has threatened to block oil exports through a key Gulf waterway in retaliation against any hostile US action. It's no surprise that Trump wants more Saudi oil on the market, but he likely misunderstood what the Saudis told him. While OPEC is facing mounting pressure from Trump to do more, America's sanctions on group members Iran and Venezuela are adding uncertainties, just as USA tariffs on Chinese goods kick in on Friday.

That kind of talk is part of a broader game Saudi Arabia played to master the oil market.

Meanwhile, China's commerce ministry said on Thursday the United States is "opening fire on the entire world", warning that Washington's proposed tariffs on Chinese goods will hit worldwide supply chains.

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