‘We Call Upon Our Brothers And Russia Not To Appease Trump’: Iran Says 3 Members Will Veto OPEC Supply Hike

Earlier this week, world-renowned commodities strategist Donald Trump was “at it again” when it comes to accusing OPEC of being “at it again.”

For Trump, “at it again” means tweeting and when it comes to OPEC, “at it again” means doing what cartels do, namely conspiring to manipulate prices.

Of course the term “conspiring” doesn’t really apply because what the hell does a “cartel” do if not manipulate prices? It’s not a secret. Calling it a “conspiracy” is a lot like accusing KFC of “conspiring” to sell fried chicken.

Here’s Trump:

Oil prices are too high, OPEC is at it again. Not good!

— Donald J. Trump (@realDonaldTrump) June 13, 2018

That is of course a reiteration of this infamous tweet from April:

Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!

— Donald J. Trump (@realDonaldTrump) April 20, 2018

I’m not sure what the point of the June 13 tweet was, because according to media reports, his April tweet did the trick. Three weeks ago, the Saudis appeared to relent, indicating that, out of concern for “consumers”, they would work to increase supply going into the back half of the year.

“The tweet moved the Saudis”, Bob McNally, founder of Rapidan Energy Group LLC and a former White House oil official who spoke to Bloomberg last month said, adding that “the message was delivered loud and clear”.

Ten days later, Bloomberg reported that, quote, “the U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day.” There’s more on that here.

All of this is of course Trump trying to ensure that rising prices at the pump don’t end up effectively negating the assumed benefits that accrue to consumers from the tax cuts. In short, the idea that something which is largely out his control (OPEC) will end up short-circuiting his MAGA “miracle” (which, incidentally, is not a “miracle” at all and all you have to do to understand that is pull up a bar chart of quarterly GDP growth), is a non-starter. So he decided to turn the diplomatic screws on Riyadh in an effort to convince them to help drive prices lower.

Obviously, the geopolitical calculus here is complex. Part of the reason prices were on the rise was because the market was pricing in a geopolitical risk premium from (specifically) Trump’s decision to exit the Iran deal and (more generally) from the installation of John Bolton’s mustache at 1600 Penn. There’s a literal name for that latter point: “the Bolton premium”.

Even outside of Trump’s efforts to convince Riyadh to increase supply, the Saudis promised to stabilize the market in the event any missing Iranian barrels ended up driving prices too high. The following is from state-run SPA, citing the energy ministry (from back in May):

The Kingdom of Saudi Arabia is committed to supporting the stability of oil markets after the U.S. decision to withdraw from Iran nuclear deal. The kingdom will work with major producers and consumers within and outside OPEC to curb the effects of any supply shortages.

But you’d be forgiven for casting a bit of a wary eye at that. Riyadh reportedly wants $80/bbl at least and possibly even $100, in order to, among other things, drive up the valuation of the Aramco IPO. Needless to say, that risks emboldening previously uneconomic U.S. supply which in turn imperils market share, but that might be a gamble to Kingdom is willing to take. After all, there’s only so much money you can extort from your relatives on the way to replenishing SAMA reserves.

For his part, Iran’s Oil Minister, Bijan Namdar Zanganeh said some bizarre shit last month. Specifically, he accused Trump of conspiring with Riyadh to drive up crude prices in order to benefit U.S. shale.

“[Trump] is using shenanigans to raise oil prices to make shale production economic,” Zanganeh posited, before saying that “Trump has cut a deal behind the scenes with some OPEC members to keep production down and help boost prices.”

Higher prices, Zanganeh went on to note, “boost the U.S. economy, employment and the tax base.”

Now who knows, that might be true on some level, but it’s definitely not true at the highest level, where “highest level” means what the public hears from Trump who, again, is determined to let Americans know that he’s not going to “accept” a situation where gasoline prices fuck up the tax cuts.

Well as you’re undoubtedly aware, the OPEC meeting is coming up. Here’s what to expect according to a new note from Barclays penned by, and this never gets old to the extent it proves that you can’t make this shit up anymore, Michael Cohen:

We see three possible outcomes from the next OPEC meeting: 1) we see a slight rise in output by 700-800 kb/d as most likely, though volatility indicators suggest the market has already priced this in; 2) in our view a less likely scenario would be a lack of consensus on the output increase, with Saudi Arabia and Russia deciding to increase output unilaterally, which results in a more bullish pricing scenario with prices averaging $80-85/b over the balance of the year; and 3) what we believe would be a far less likely scenario is OPEC and Russia raising output by over 1 mb/d, which would likely more than offset the Venezuela disruption and expected but unknown size of the disruption in Iran.

Well on Sunday, Iran’s OPEC representative Hossein Kazempour Ardebili was out suggesting that OPEC should tell Trump to stick his “demands” up the same ass that Stormy Daniels spanks with rolled up magazines.

“Market is well-supplied, and OPEC should abide by its decision up to the end of the year,” he told Bloomberg, adding that he is “confident many other OPEC members feel and act the same [as] no changes took place in market fundamentals.”

And that was hardly the end of it. He went on to say that while “Saudi Arabia and Russia want to increase production,” that change “requires unanimity”, before asserting that “three OPEC founders are going to stop it.”

He continued:

We as Iran, and I hear Iraq and Venezuela, are against any increase in OPEC production. I am confident many other OPEC members feel and act the same. Our OPEC and DOC agreement has a date until end of the current year. We call upon our brothers in OPEC and Russia that we do not need to appease Trump, who sanctions two OPEC founders and also Russia.

So there you go. The plot thickens. I guess. I mean, it was already pretty goddamn thick, but this is highly amusing because you can just imagine what Trump is going to think when he hears this.

Stay tuned, because as Trump would say, “the ratings will be tremendous.”