One analyst predicts that OPEC will begin pulling back on production soon. File Image / Pixabay
Once more, the U.S. granting leniency to countries wanting to import oil from Iran caused crude prices on Wednesday to tumble, this time by nearly 1 percent - and with oil now at an 8 month low, nobody is more satisfied than U.S. president Donald Trump, who insists his hawkish international stance is responsible for giving motorists a break at the pump.
West Texas Intermediate crude ended Wednesday's session down 54 cents, or nearly 1%, at $61.67, its lowest closing price since mid-March (earlier it touched a nearly eight-month low at $61.20 per barrel); Brent was down 13 cents to $72 per barrel.
The short-term mood among traders was described by Phil Flynn, senior market analyst at Price Futures Group, as "negative" , and it is likely to stay that way on the strength of reports from the Organization of the Petroleum Exporting Countries (OPEC) and other sources that global demand is slowing and the oil market could swing back into surplus next year, regardless of the impact of the U.S. sanctions on Iran.
Donald Trump, president, USA
I don't want to drive oil prices up to $100 a barrel or $150 a barrel
No sooner did crude hit its latest lows on Wednesday than Trump, during a wide-ranging press conference the day after the mid term elections, declared that "If you look at oil prices, they've come down very substantially over the last couple of months, [and] that's because of me; because you have a monopoly called OPEC, and I don't like that monopoly."
He also explained his rationale for granting Iran sanction waivers to eight countries: "I did it a little bit because they really asked for some help, but I really did it because I don't want to drive oil prices up to $100 a barrel or $150 a barrel, because I'm driving them down."
Unsurprisingly, the mainstream press ridiculed the brash billionaire's boasts, but undeniably Trump earlier this year repeatedly hammered de facto OPEC leader Saudi Arabia to boost output in order to counter a market tightening; the kingdom responded, other OPEC members also boosted output, and the recent crude prices losses have at least partly been attributed to their actions.
Still, analysts think the scenario will change now that the mid terms are over: Joe McMonigle, analyst at Hedgeye, stated in a note, "OPEC was feeling the Trump pressure but producers took action with the thinking that they just needed to get past the U.S. election.
"We expect to start hearing public comments from OPEC ministers this weekend" about pulling back on the recent production boost.
Despite this week's losses, there seems to be a rare sense - however fleeting - that the crude market is in a desirable place: Sultan Ahmed Al Jaber, chief executive officer of Abu Dhabi National Oil Co., on Tuesday noted that the market "is very robust, solid, and strong," and that "I think it's only the emotions that are unstable."