Americas News
U.S. Pushes for Lower Oil Prices as OPEC Mulls Production Boost
The timing this week of unnamed sources saying the Organization of the Petroleum Exporting Countries (OPEC) will consider boosting crude production coincides uncannily with U.S. democrats urging president Donald Trump to prod the cartel to lower oil prices: but while OPEC turning on the taps would ultimately result in what the dems want, OPEC's motivation to act seems to be for practical rather than political reasons.
Speaking to Reuters, an unnamed OPEC source said the cartel is debating whether to lift restrictions on output - which were initiated to end the global glut and bring about a proper supply and demand ratio - in part because of the rising price of oil, but also because of fears that drastic output reductions in Venezuela and possible disruptions elsewhere could lead to unwanted market tightening and price spikes.
Meanwhile, on Wednesday, Charles Schumer, U.S. senate democratic leader, held a news conference at a Washington Exxon station to criticize Trump for gasoline prices jumping 25 percent since the brash billionaire took office last year.
He declared, "It's time for this president to stand up to OPEC; he's palling around with Saudi Arabia and the United Arab Emirates and all these other oil-rich countries......[Trump] should buck his oil industry buddies."
Schumer and other democrats have sent a letter to Rick Perry, Trump's energy secretary, urging him to raise the issue when OPEC meets in Vienna on June 22.
But the ailing democrats seem to be grandstanding in a bid for support rather than acting on any concern for global fundamentals, and it's noteworthy that Schumer's conference came ahead of the busy summer driving season that starts with the U.S. Memorial Day holiday weekend.
Additionally, senator Lisa Murkowski, a republican who chairs the U.S. Energy Committee, said that while "OPEC's supply restrictions are higher and should be better....I'm stunned to hear my colleagues encouraging more production from the likes of Iran and Saudi Arabia, rather than right here in America."
While Trump has criticized OPEC on many issues since taking office, including artificially boosting prices, his general mindset seems to be that higher prices benefit industry; and that point was reiterated by the Canadian CBC news agency, which on Wednesday stated that "Higher oil prices are doubly helpful for Canadian producers, because they are priced in U.S. dollars, while Canadian companies book most of their expenses in Canadian dollars."
CBC quoted Doug Porter, economist for the Bank of Montreal, as saying that in Canadian terms West Texas Intermediate is currently trading as high as $91 per barrel, and "that's up 50 percent from just eight months ago."
Presumably, Schumer may be hoping that a forecast earlier this week from Greg McKenna, chief market strategist at AxiTrader, will come true: he noted that with regards to Trump's apparent success in getting the likes of China and North Korea to play ball with the U.S., "Without a further escalation in geopolitical risk, oil might be due a pullback."
