Published: Сб, Июля 07, 2018
Business | By Kate Woods

What's behind the rise in the oil price?

What's behind the rise in the oil price?

Iran's representative to OPEC called on US President Donald Trump to "please stop" tweeting about oil, adding that "with your frequent and indecent tweets oil prices have gone up 10 dollars". If anything, they are driving prices higher as the US defends many of their members for very little $'s. This must be a two way street.

Weighing on prices was a rise in U.S. crude inventories of 1.2 million barrels in the week to June 29, to 417.88 million barrels, the U.S. Energy Administration (EIA) said on Thursday.

Because many OPEC countries are facing domestic troubles, the general expectation is that Iran, which is the fifth largest crude oil exporter, has a larger and increasingly discernible impact on how fuel prices behave in coming months.

Iran OPEC Governor Hossein Kazempour Ardebili said President Donald Trump's tweets have driven up oil prices. The outage at the 360,000 barrels per day (bpd) Syncrude facility in Canada has contributed to a sharp reduction in the discount for USA crude versus Brent crude over the past month.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded down about 0.8%, at around $74.01 a barrel, and fell to around $73.25 (down about 1.8%) shortly after the report's release.

Trump's OPEC tweets come as gasoline prices are more than 60 cents a gallon higher than a year ago.

In the global context, however, USA gas is already incredibly cheap.

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Last month, Saudi Arabia and Russian Federation agreed to increase production and the USA continues to produce at record levels, however, unless there is a drop in demand, it appears we are headed toward a supply deficit later this year.

China says it will retaliate, and U.S. President Trump said on Thursday he may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods.

Oil was mixed on Friday, with short-covering pushing up US crude futures while Brent slipped on global trade tensions and increased Saudi production. Now that prices have rebounded from a low of $30 a barrel in January 2016 to about $75, OPEC and other exporters led by Russian Federation have agreed to slowly increase exports by what will effectively be 700,000 barrels a day now, with another half million barrels later in the year as sanctions on Iran take effect. Trump could also use it as a tool to persuade buyers of Iranian oil to halt their purchases in the run-up to November 4, when US sanctions against the Islamic Republic are due to snap back.

The U.S. government is lobbying Iranian oil importers, including China and India, and "asking them to go to zero, absolutely yes", according to a U.S.

This was on top of the even bigger draw of 9.228 million barrels of crude oil reported for the week-ending June 22.

Oil prices dropped on the news, in part because the figures were the inverse of the drop in inventories shown by industry group the American Petroleum Institute on Tuesday.

U.S. crude inventories probably declined by 5 million barrels last week, according to a Bloomberg survey.

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