President Donald Trump has ramped up his Twitter assault on the Organization of the Petroleum Exporting Countries and high oil prices, but experts say the president's own push to cut off Iran's oil sales is the biggest reason oil prices have gone up recently.
Earlier, the Saudi and Russian energy ministers reaffirmed their 1 million-barrel-a-day agreement reached last month in Vienna, after Trump tweeted over the weekend that he'd received assurances from the Middle Eastern nation that it could increase production by double that volume. The bank said that USA efforts to block Iran from exporting oil would make it hard for OPEC to meet supply demands, forcing prices to rise.
In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase oil output by up to two million barrels, an assertion the White House rowed back on in a subsequent statement.
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Oil prices dropped yesterday, falling 97 cents to $73.17. But U.S. allies aren't on board with Trump's planned sanctions on Iran. Weekend discussions with Saudi Arabia, the de facto leader of OPEC, led to pledges from Riyadh to ensure the market was stable given lingering concerns about supply deficits. Suggesting that OPEC countries should produce more crude oil to increase supply and lower prices if they want to keep America's strategic partnership, he said: "This must be a two-way street".
An oil pump jack is seen at sunset near Midland, Texas, U.S., May 3, 2017.
"Further declines in US crude oil inventories and the significant outage in Libyan oil supply are helping to keep a floor under the market", said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
Tehran blames rising prices on US sanctions imposed on Iran and Venezuela, founding members of the cartel.
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Every extra dollar on the price of a barrel of crude costs USA consumers roughly $3 billion a year, assuming refining margins and fuel taxes remain constant, and ignoring gasoline consumption by businesses and the like.
USA budget analysts generally look at the impact of tax changes over a ten-year period ("Estimated budget effects of the conference agreement for HR 1", Joint Committee on Taxation, Dec. 18, 2017). "People are firming up their numbers of how much Iranian oil exports will be lost, and how much OPEC will increase".
An Iranian Revolutionary Guards commander, meanwhile, said on Wednesday that Tehran might block oil shipments through the Strait of Hormuz, a major route for transporting crude in the Gulf.
Oil slipped below $77 a barrel on Friday, under pressure as higher Saudi production and trade tensions between the United States and China offset support from oil supply disruptions.
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Chinese companies have started turning away from US soybean suppliers and looking to other sources for agricultural products. He added that the trade war could cancel out previous gains from tax-code rewrite that Trump signed into law past year .