Quick! Somebody get King Salman on the phone!
… is what Donald Trump shrieked at someone on Tuesday morning.
Over the weekend, Trump raised more than a few eyebrows by tweeting out what certainly looked like the details of a private conversation he had with Riyadh about how to handle the situation if the State Department’s demands that U.S. allies cut imports of Iranian crude to zero by November ended up catalyzing another leg higher in crude.
Specifically, Trump said he had convinced King Salman to increase production by 2 million b/d, a remarkable claim coming as it did on the heels of an OPEC meeting that tipped, at most, a 1 million b/d increase for OPEC+ as a group.
Iran was not amused.
“We are 15 countries in an agreement,” Iran’s OPEC representative Hossein Kazempour said, before noting that even if you “set aside that [the Saudis] do not have the capacity, there is no way one country could go 2 million b/d above their production allocation unless they are walking out of OPEC.”
Oil Minister Bijan Namdar Zanganeh echoed that consternation, saying over the weekend that “any production increases above limits agreed to by OPEC are a breach of [the] output agreement reached last month in Vienna.”
Of course that output agreement was itself a product of Trump’s badgering. Long story short, he’s worried that rising prices at the pump will imperil the gains that accrue to U.S. consumers from his tax cuts and come hell or high (Iran) sanctions, he’s going to try and circumvent that by bullying OPEC.
Well, guess what? Trump’s efforts aren’t working. On Tuesday morning, amid outages in Canada and Libya, WTI climbed above $75 for the first time since 2014:
For what it’s worth, crude looks overbought for the first time in more than five months:
But I’m not sure that matters right now. Here’s Goldman, from a note dated Monday:
OPEC voluntary/involuntary disruptions likely to be greater near-term driver of oil prices/equities vs. US production. While US supply growth has been a key area of investor focus and will likely remain so (in our view), we believe in the near term the level of OPEC production — deployment of spare capacity by Saudi Arabia, Iraq, UAE, Kuwait (and ex-OPEC by Russia), and involuntary disruptions in Libya/Venezuela/Iran — are more important drivers of crude.
Morgan Stanley seems to agree. They’re calling for lower output from Iran, Libya and Angola and suggested this week that Iranian exports to Europe, Japan and South Korea, (some 1 million b/d) “will indeed fall to minimal levels”.
So I don’t know. I guess we’re going to need more phone calls to Riyadh.
Oh, and hilariously, the bottom fell out just minutes later, with oil diving to session lows.
I'm not saying the 10-year yield is down because oil dropped, but I'm not not saying it.
(I am saying it) pic.twitter.com/RG0cw4Q3xw
— Luke Kawa (@LJKawa) July 3, 2018