Trump again accused the OPEC of driving fuel prices higher on Wednesday, and urged United States allies such as Saudi Arabia, to pump more if they wanted Washington to continue protecting them against their top foe, Iran.
Even so, renewed US sanctions on Iran against its oil exports look set to tighten supply further. "Please stop this method", OPEC Governor Hossein Kazempour Ardebili said Thursday, Iranian news service Shana reported. Any time there's talk of increased production or even a suggestion, prices tend to go down. Thus, even if OPEC managed to follow through on the full output increase, it would be insufficient to prevent further declines in global crude oil inventories.
The latter have soared in the last two years to around 400,000 barrels per day in July, worth around $1 billion at current market prices. Analysts had expected a 3.5 million-barrel draw.
West Texas Intermediate crude oil is trading for US$73.09 per barrel.
Trump also tweeted on the topic two weeks ago saying he hoped OPEC would increase production in an effort to keep prices down. Their impact will also have negative repercussions for Europe and other traditional allies, many of whom are already frustrated by the announcement of new tariffs on their imports to the U.S.
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"Trump's demand that Iranian oil should not be bought, and (his) pressures on European firms at a time when Nigeria and Libya are in crisis, when Venezuela's oil exports have fallen due to United States sanctions, when Saudi's domestic consumption has increased in summer, is nothing but a self harm", he was quoted as saying by Reuters.
OPEC, together with a group of non-OPEC producers led by Russian Federation, reduced output in 2017 to prop up the market.
Ardebili said Iran is also on the "two-way street" as a member of OPEC.
Yesterday, the deputy commander of the Sarollah Revolutionary Guards in Tehran warned that any attempt to undermine Iran's oil exports will lead to the closing of the Strait of Hormuz-a narrow waterway vital to oil distribution in the Persian Gulf region.
Russian export duties and extraction taxes now equate to between 60 percent and 65 percent of oil prices and that will remain roughly the same with the proposed changes, said Denis Borisov, a director at the Ernst & Young Oil and Gas Center in Moscow. That may reduce the pressure on Saudi Arabia to keep oil prices high, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.
Meanwhile, Royal Dutch Shell's boss has said it will be "foolhardy" for the oil and gas producer to set hard targets to reduce carbon emissions as it risked exposing the energy giant to legal challenges.