Oil prices are now down over 20 percent from recent highs, and President Trump knows exactly where the credit for that belongs. “If you look at oil prices they’ve come down very substantially over the last couple of months,” President Trump said in a news conference last week. “That’s because of me.”
The President is partially correct about that, but not for the reasons he thinks. He attributes it to his hard line on OPEC. But what has actually happened is that crude oil inventories in the U.S. have risen for seven straight weeks.
As pointed out in the previous article, one reason for that is that China, in response to the ongoing trade spat, has stopped importing U.S. oil. Earlier this year China imported more than half a million barrels of day of crude oil from the U.S. Loss of this export market has contributed to the inventory growth in the U.S. — and hence to the drop in crude oil prices. (Presumably, crude oil inventories are dropping elsewhere, but possibly in countries with less transparency about their inventories).
Some feel that there is also an element of fear that global demand may be slowing. But this week Reuters reported that China’s crude oil imports reached an all-time high in October. So, despite the trade war, demand in China doesn’t appear to be slowing. But China isn’t getting its oil from the U.S. now.
Where is China getting its oil? Iran, for one. Another way that President Trump has helped oil prices go down is that he blinked as the deadline for sanctions on Iran’s oil exports neared. Oil prices had risen about 50 percent over the past year because of the impending sanctions that were expected to take Iran’s oil off the market. (I don’t recall him taking credit for oil prices that rose in response to sanctions).
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But just ahead of the November 5th deadline, the Trump Administration said it would grant waivers to eight countries – including China – to allow them to keep importing Iranian crude oil for now. The waivers allow these countries another 180 days to phase out their purchases of Iranian crude oil.
In light of the run-up in price in anticipation of the sanctions, it isn’t surprising that oil prices would pull back in response to a temporary reprieve.
So, sure, President Trump is partially responsible for the reprieve in oil prices. The cost of this has been the loss of a growing market for U.S. oil producers, and a weakening of the sanctions against Iran.
By Robert Rapier
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This is not new. Twelve hours after meeting the North Korean leader in Singapore, he claimed that North Korea no longer poses a nuclear threat to the United States though North Korea has not de-nuclearized nor relinquished any of its nuclear warheads or missiles. Still, President Trump declared victory in reducing tensions with North Korea.
I am sure that he will declare victory again when he is forced soon to end his escalating trade war with China though China has never bent the knee to him nor hesitated for a minute to retaliate blow for blow against his imposition of tariffs on its exports to the US.
Now President Trump is claiming victory for the recent slump in oil prices. He will also claim that his decision to issue sanction waivers to eight countries has been a masterstroke. Little did he know that the slump in oil prices is no more than a realization by the global oil market that US sanctions have so far failed to cost Iranian oil exports a loss of even one barrel. Furthermore, the issuing of sanction waivers to eight countries who didn’t need them in the first place and who would have continued to buy Iranian crude with or without his waivers is the clearest admission by the Trump administration that their zero option is out of reach and that sanctions are doomed to fail. Moreover, the eight recipients of the waivers have neither increased or decreased their purchases of Iranian crude as a result of the waivers.
Another factor weighing on prices is that the global oil market has not re-balanced completely and that there is a small pocket of glut capable of taking care of outages in Venezuela and elsewhere. This means that Saudi Arabia’s and Russia’s decision to add 650,000 b/d six weeks ago to keep prices down was a major mistake. It has just added to the glut.
Claims that US policies and rising US oil production were behind the slump in oil prices are not true either. If that was the case, then why does President Trump keep haranguing OPEC to raise production to keep prices down. Why doesn’t he use rising US oil production to flood the global oil market with oil and thus depress oil prices. It points to one thing: EIA’s claims are plain untruths.
Still oil prices are volatile by definition because they are always subjected to various economic and geopolitical pressures virtually on daily basis. That is why one shouldn’t be surprised to see oil prices shuttling between bull and bear markets all the time.
In October the oil price hit $87 a barrel. Today it is $67. Tomorrow the markets could change from bearish to bullish sending prices up to $80 buoyed by robust market fundamentals. Will President Trump also claim victory for the rising oil prices?
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
"That's because of me"??
Without a doubt in any reality Oil did not dip because of President Unlimited Hot Air. Not only will he perpetuate its return to 70-80 range, it could very well reach record highs because of extremely horrible decisions. At the great cost of his ego, aggressive posturing will eventually cave in on itself and crush this unbearable menace to US politics. Dare I say even lead into the next depression? Yep