‘OPEC is at it again’: Trump criticizes oil cartel for ‘no good’ high prices that help Russia

President Donald Trump criticized OPEC on Friday for maintaining ‘artificially high’ oil prices, in a move that is seen as a suggestion that he has the power to change the direction of markets in a way that could hurt the Russian economy.

‘Looks like OPEC is at it again,’ Trump tweeted. ‘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!’

Current high oil prices are, in part, a result of airstrikes on Syria last week.

While gasoline and heating oil prices in the U.S. are impacted by global crude oil prices, Russia’s economy stands to be hit unusually hard if the bottom drops out of oil markets.

While only about 9 per cent of the Kremlin’s direct budget revenues come from oil and gas, that sector ultimately fuels more than half of the Russian economy.

President Donald Trump lashed out at the OPEC oil cartel on Friday, claiming its members are artificially keeping prices high despite a glut in the marketplace

The president's complaints about oil prices may be related to his Moscow agenda: A bottoming oil market would dramatically harm Russia's economy

The president’s complaints about oil prices may be related to his Moscow agenda: A bottoming oil market would dramatically harm Russia’s economy

The Carnegie Endowment reports that as the price of West Texas Intermediate (WTI) crude oil goes up and down, Russia's government revenues track along with it – meaning that a plunging market could devastate the country's economy

The Carnegie Endowment reports that as the price of West Texas Intermediate (WTI) crude oil goes up and down, Russia’s government revenues track along with it – meaning that a plunging market could devastate the country’s economy

Russia was the largest oil producer in the world in 2016, edging out even Saudi Arabia and providing more than one-eighth of the oil traded in the global marketplace. 

Last year, following Trump’s inauguration, the U.S. reclaimed the top spot by a significant margin.

Fully 57 per cent of Russia’s GDP ‘depends on oil,’ according to Andrey Movchan, director of the Economic Policy Program at the Carnegie Endowment’s Moscow Center.

Movchan writes that Russia imports about 60 percent of its total consumption and pays for imports with earnings from exports, ‘which are overwhelmingly dominated by oil and gas.’

And ‘at least 60 percent of consolidated budget revenues’ in Moscow ‘come from the mineral extraction tax, excise duties, export duties, value-added tax on imports and other taxes attributable to the oil and gas sector directly or indirectly,’ he adds. 

In addition, Movchan explains, at least another 10 per cent of Russia’s GDP is dependent on oil and gas income being ‘converted into investments and spending in other sectors of the economy.’

Trump said Wednesday during a joint press conference with Japanese Prime Minister Shinzō Abe that ‘there has been nobody tougher on Russia than President Donald Trump.’ 

OPEC, the Organization of the Petroleum Exporting Countries, is a group of 14 oil-producing nations whose members account for about 44 per cent of the world's production and 73 per cent of its proven reserves, giving its leaders enormous power to flood or starve the markets

OPEC, the Organization of the Petroleum Exporting Countries, is a group of 14 oil-producing nations whose members account for about 44 per cent of the world’s production and 73 per cent of its proven reserves, giving its leaders enormous power to flood or starve the markets

More than half the Russian economy depends on oil and gas production, according to the Carnegie endowment's Moscow Center

More than half the Russian economy depends on oil and gas production, according to the Carnegie endowment’s Moscow Center

Oil prices fell on Friday after Trump’s tweet, but they were still set for a weekly gain.

Brent crude oil futures were at $73.01 per barrel at 1357 GMT, down 77 cents from their last close. U.S. West Texas Intermediate crude futures were down 56 cents at $67.73 a barrel.

The United States cannot legally influence oil other than through releasing oil from its strategic reserves which it has done occasionally, most recently last year in the wake of Tropical Storm Harvey.

‘We are doing our role to correct the market and the market, as we said, is not yet balanced,’ UAE energy minister Suhail al-Mazrouei said in response to the tweet, adding that prices were not artificially high.

OPEC Secretary-General Mohammad Barkindo said members were friends of the United States and have a vested interest in its growth and prosperity.

Both contracts had been trading in positive territory before Trump’s tweet.

Brent and WTI hit their highest levels since November 2014 earlier this week, at $74.75 and $69.56 per barrel respectively, buoyed by a tightening market, higher demand and geopolitical risks.

Saudi Oil Minister Khalid al-Falih said OPEC and its allies were still far away from reaching their target and that a drawdown in oil inventories needed to continue.

Traders are shown working in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange

Traders are shown working in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange

The biggest oil concerns in Russia are still state-owned, tying production and profits to government revenues along with GDP growth

The biggest oil concerns in Russia are still state-owned, tying production and profits to government revenues along with GDP growth

OPEC and its allies are curbing oil production until the end of the year, helping push up prices.

‘Even if OPEC were to reach its target of reducing oil inventories to their recent five-year average by the next official June meeting, Saudi Arabia is driving a strong agenda to maintain cuts for the balance of 2018,’ BNP Paribas global head of commodity market strategy Harry Tchilinguirian told the Reuters Global Oil Forum.

Firm demand was also giving prices a floor.

‘Global oil demand data so far in 2018 has come in line with our optimistic expectations, with Q1 2018 likely to post the strongest year-on-year growth since Q4 2010 at 2.55 million barrels per day,’ U.S. bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC’s supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

‘A supporting factor is the geopolitical risk premium, related to potential new U.S. sanctions on Iran,’ UBS analyst Giovanni Staunovo said.



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