Oil prices fell back from a four-year high yesterday after Donald Trump signalled Saudi Arabia was planning to boost production by more than expected.
Last month, Opec, the cartel of oil-producing states, voted to increase production by up to a million barrels a day in a bid to keep spiralling oil prices steady.
However, fears that Trump had persuaded the Saudis to up production were stoked by a tweet which send oil markets tumbling.
Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference…Prices to high! He has agreed!
— Donald J. Trump (@realDonaldTrump) June 30, 2018
This despite a senior Saudi official telling the The Wall Street Journal that no specific promise had been made over production, but rather assurances were given that the country had the capacity to meet demand. The White House also attempted to row back from Trump’s comments.
Rumours that Saudi Arabia could be willing to increase production by more than a million barrels a day drew a stinging rebuke from its regional rival Iran, which urged fellow Opec members to “refrain from any unilateral measures”, warning that they would undermine the unity of Opec.
The US decision to reimpose sanctions on Iran following its withdrawal from the 2015 nuclear deal could, however, prove problematic for the Trump administration which is looking to bring down oil prices.
The deteriorating political situation in Venezuela and Iran, where major oil ports have been shut due to an internal power struggle could also cut global production and further increase prices.
To this end, the New York Times says that “Saudi help in making up for lost Iranian crude oil will be crucial to Mr. Trump’s efforts to contain Iran while not forcing prices up too high to cause political damage in the United States”.