Oil prices dropped on Monday, even as global producers intend to raise their production rates. Contracts between crude oil companies held bigger losses as a result of a weekend tweet from President Donald Trump, mentioning a big potential production increase from Saudi Arabia.
“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!” was posted on the President’s account.
An economist at Overseas-Chinese Bank, Barnabas Gan, said the language in Trump’s weekend tweet, suggesting that Saudi Arabia may increase output by 2 Million barrels a day, left for wide interpretation and that the surge to a fresh 3 ½-year high for the U.S. benchmark was somewhat disconcerting.
A Saudi Arabia official told the Wall Street Journal on Saturday that no promise has been made over the production but that the country has the capacity to meet the demand. A White House statement release stated King Salman of Saudi Arabia told the President that the country would increase oil production “maybe up to 2,000,000 barrels.”
Saudi Arabia and Russia recently reached an agreement at a Vienna meeting last weekend to raise output. The Chief Market Strategist at FXTM, Hussein Sayed, said, “The decision by OPEC and non-OPEC members to raise crude supplies by about one million barrels starting July 1st was considered a negative factor for oil prices. However, the rise in supply from some OPEC and non-OPEC members will be met by a decline from others; doing the math here will be complicated for investors betting on the direction of prices.”
Deputy Energy Secretary, Dan Broillette, said countries that continue to buy Iran’s oil would be given an opportunity to gradually cut back on purchases, contradicting a statement from the Trump administration that the U.S. would sanction countries that don’t cut oil imports from Iran to zero by November 4th.
Experts anticipate the market will lose another 1.5 Million barrels of oil a day by the end of 2018 from outages in Venezuela and Iran. Major oil ports in Libya have been shut down with the internal power struggle in the country that has removed 850,000 barrels a day from the global oil market.
WTI crude logged strong weekly, monthly, quarterly and first-half 2018 gains with prices increasing from long-running efforts by the Organization of Petroleum Exporting Counties to reduce production. Brent Crude had its best finish since May on Friday, with strong gains in the first half.