Trump wants oil that the world doesn't have to give
Donald Trump’s request for more Saudi Arabian oil put a spotlight on growing U.S. unease about how quickly the crude sector has switched from glut to deficit, but a boost in Middle East production may not be enough to stem the price rallies that have hit consumers.
Supply disruptions in major producers like Canada and Venezuela, coupled with strong crude demand from robust global growth, have tightened the oil market faster than many analysts expected. Early Monday, Libya’s state-run oil company said it couldn’t honor contracts to deliver oil at two ports, widening outages there, after rebels blocked exports. Prices have shot up in recent sessions in response. On Friday, U.S. crude ended just over $74 a barrel, its highest since November 2014. Brent, the global price yardstick, is close to $80 a barrel. Early Monday, prices were slightly lower.
That has contributed to rising gasoline prices in the U.S., just months before the midterm elections. GasBuddy, a fuel-tracking app, estimates that prices will be around $2.90 a gallon for the Independence Day holiday, the highest on that day since 2014.
In several tweets, Mr. Trump has blamed the Organization of the Petroleum Exporting Countries and on Saturday, he said he had asked Saudi Arabia, in a call to its leader, to boost its oil production.
But even if the cartel heeds Mr. Trump’s call to increase production, there may not be enough spare capacity to quickly make up for supply disruptions, particularly as renewed U.S. sanctions look set to drastically reduce Iranian production, analysts say.
With the combination of supply disruptions and high demand, “we are getting a preview of how the oil market will react when Iranian oil comes off the market,” said Ellen Wald, oil-market analyst and president of Transversal Consulting.
Only last summer, oil producers and consumers were contemplating a future of cheap crude following three years of massive oversupply fueled by booming U.S. output. Oil prices fell below $30 a barrel in early 2016 and only major production cuts by OPEC and its allies managed to arrest the decline.
Now prices have risen to levels that analysts say could begin to hurt the global economy.
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