US President Donald Trump discussed future oil supplies with Saudi Arabian King Salman on the phone during the weekend as both countries look to encourage global economic growth on the oil front.
With Saudi Arabia and the US two of the biggest producers of oil globally, both countries find their economies intrinsically linked to the commodity. Given that the Middle Eastern nation wants to diversify its economy and become less reliant on oil, finding some stability in its value is key to turning to other assets.
The US, meanwhile, wants to become more self-sufficient and turn away from importing as much oil from overseas. It has expanded its shale gas production facilities to scale up the amount of oil that it can make available domestically.
This is a challenging time for President Trump, as US mid-term elections this November are likely to become more contentious if oil prices go up to the point of affecting affordability for consumers. This would put a stopper on good economic growth.
Trump has railed against OPEC in recent weeks as he seeks a worldwide agreement to increase crude oil output and allow the market to settle. Saudi Arabia is the de-facto leader of OPEC, largely because of its high oil output and reliance on its performance.
While attending the United Nations General Assembly held in New York last week, Trump accused OPEC of “as usual ripping off the rest of the world.” He followed this up by saying: “I don’t like it. Nobody should like it.”
Trump then moved on to mentioning how the US supports many OPEC members in one way or another, opining that “we defend many of these nations for nothing” and adding that the countries in question have decided to “take advantage of us by giving us high oil prices.” In a speech likely to inflame some tensions but secure support among his electorate, Trump added: “We want them to stop raising prices; we want them to start lowering prices.”
The White House confirmed in a statement that Trump and Salman shared a phone call, during which they discussed “issues of regional concern.”
Current Iranian sanctions levied by the US come into force in early November, and it seems that the market is fluctuating ahead of their introduction. Tehran will no longer be able to export any of its oil supplies after that time, which has led to China and other countries currently stockpiling oil from Iran.
The expected drop in supply has bumped the price of Brent crude to a four-year high of $82.72 a barrel, even as other oil-exporting nations increase their production levels.US West Texas Intermediate (WTI) crude peaked at $73.25 per barrel.
Saudi Arabia is now in discussions with the rest of its OPEC consort to deliver an extra 500,000 barrels of oil per day to deal with the expected drop-off in supply through Iranian sanctions. Some non-OPEC countries are also likely to agree to ramp up their production levels.
OPEC is not due to release any statement confirming its agreement to Trump’s requests and does not show any signs of wanting to go along with his demands.