Oil futures sank more than three per cent overnight after US President Donald Trump said OPEC should ease its approach on boosting crude prices, which he said were ‘getting too high’.
After hitting their highest in over three months last week, Brent crude oil futures were down $US2.06, or 3.1 per cent, to $US65.06 a barrel and US crude fell $US1.76 to $US55.50 a barrel, also a 3.1 per cent loss.
‘Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!’ Trump tweeted, his latest in a series of tweets or comments made regarding oil prices since April 2018.
After the tweet, prices reversed earlier gains that had built on expectations for tightening supply and hopes for an agreement a day after the president promised progress in coming weeks over US-China trade talks.
‘Trump appears to be attempting to micromanage the oil market by encouraging the cartel, particularly the Saudis, to maintain strong enough production to keep global supplies in surplus,’ Jim Ritterbusch, president of Ritterbusch and Associates, said in a client note.
‘But as far as the Saudis are concerned, today’s tweets could even embolden their efforts toward restraint.’
Crude prices have risen by about 20 per cent since the start of the year when the Organisation of the Petroleum Exporting Countries and non-member producers, such as Russia, cut production to reduce global supply.
US sanctions on exports of crude from Iran and Venezuela have also helped tighten the market and support prices as production in the United States surges.
‘If you read into it, I think there’s speculation there will, in fact, be another round of waivers granted to countries and companies to buy Iranian oil,’ said John Kilduff, a partner at Again Capital Management, said about Trump’s tweet.
‘That’s also why you’re seeing the negative reaction.’
The US surprised the market after granting waivers to eight Iranian oil buyers when the sanctions on oil imports started in November.
Brent futures fell 22 per cent that month and the waivers influenced OPEC’s decision to agree in December to supply cuts starting in 2019.
Adding to the uncertain supply picture was ongoing political unrest in both in Venezuela and Libya.
Nigeria, Africa’s largest oil exporter, where as many as 39 people were killed in election violence over the weekend, also added production risk.
Goldman Sachs analysts said on Monday that ‘the near-term outlook for oil is modestly bullish over the next two to three months,’ but added that the outlook for later in 2019 was weaker due to surging US exports and an ‘an increasingly uncertain economic, policy and geopolitical backdrop’.