US President Donald Trump’s weekend of oil diplomacy offered mixed messages on supply, and conflicting responses from traders after prices fell even as analysts predicted any drop may be short-lived.
Crude fell in New York late Sunday after a Trump tweet over the weekend suggested that Saudi Arabia had agreed to pump 2 million more barrels a day. But follow-up statements from the White House and the Saudi Press Agency were more ambiguous. They both said the two sides had talked, but neither statement cited a specific target.
In the short term, even the chance of a Saudi boost would likely lower prices, said Phil Flynn, a senior market analyst at Price Futures Group Inc. But the underlying dynamic of a market in which demand increasingly threatens to overtake supplies could push prices back up over the long run, he said.
“Demand for oil will start to go back up again, and the market will quickly absorb those barrels," Flynn said by telephone. “Then you’ll be in a situation where you’ve essentially removed most of the spare production left in the globe.”
West Texas Intermediate futures for August delivery fell 0.8 per cent to $73.59 a barrel at 7:28 p.m. in New York. Brent crude, the global benchmark, dropped 68 cents to $78.55 a barrel.
Last week, hedge funds cut bets on falling WTI crude prices by 60 per cent, the most in data going back to 2006. The shutdown of an oil-sands upgrader in Canada, tensions in Libya, Venezuela’s economic collapse and a US call for allies to stop buying from Iran have all taken a toll on the global crude market
A tighter inventory picture in the US has also kept crude prices elevated. Stockpiles tumbled the most since September 2016 last week, production increases paused and the oil rig count has edged lower.
Trump’s administration in early May said that it would renew US sanctions on Iran and has sought to reduce other foreign buyers’ purchases of Iranian crude.
Trump’s tweet “doesn’t change the dynamic," said Andy Lipow, the president of Lipow Oil Associates LLC in Houston, in a telephone interview. “The market perception is that supplies are tight and will get tighter with the loss of Iranian oil. It may not be until we see Brent in excess of $80 that we actually see the Saudis react."