U.S. President Donald Trump is pressing OPEC and its largest member Saudi Arabia to not cut production in order to push oil prices lower for the U.S. public and the country's economic growth, an expert told Anadolu Agency on Wednesday.
'Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!' Trump wrote on Twitter on Monday.
The statement came a day after Saudi Arabia said it would cut exports by 500,000 barrels per day (bpd) in December, and signaled that OPEC might cut output by 1 million bpd in its much-anticipated meeting next month on Dec. 6.
However, Trump has also long targeted lowering gasoline prices in the U.S. for the American public.
His latest tweet was 'to boost his own popularity,' according to Caroline Bain, chief commodities economist at London-based Capital Economics.
'For the vast majority of the voting population, it is good news to have lower petroleum prices. It keeps the consumers happy,' she told Anadolu Agency.
Before the critical midterm elections for the Congress on Nov. 6, crude prices registered their highest level in the last four years with Brent crude reaching as much as $86.74 on Oct. 3, and West Texas Intermediate (WTI) climbing as high as $76.90 on the same day.
The second wave of renewed U.S. sanctions on OPEC's third largest exporter officially started on Monday, Nov. 5 targeting Iran's energy, shipbuilding, shipping, and financial sectors, the result of which threatens to upset the supply demand balance in the market.
'The main reason why oil prices have risen so much was the prospect of losing a lot of Iranian oil, and Washington suddenly noticed the impact it was going to have in terms of oil prices,' Bain said.
'That's why we saw the waivers, and that's why Trump is asking OPEC not to cut production,' she added.
- Waivers for Iranian crude buyers
Last week, Washington granted waivers to eight nations to continue importing Iranian crude for 180 days. According to analysts, the sudden decline in Iranian exports could create a significant supply gap in the global market and push prices higher.
According to Bain, it is even possible to see an extension on the U.S.' waivers depending on the state of the market at the time. 'If OPEC does cut production, then maybe waivers would be extended,' she said.
Iran's crude production was 3.3 million bpd in October, according to OPEC's Monthly Oil Market Report for November.
The country's crude exports could decrease to around 1 million bpd this month due to Washington's sanctions kicking in on Nov. 5, according to some analysts.
Meanwhile, the eight importing nations with their waivers have six months to find other producing countries to meet their demand.
'The idea is, during the 180 days the eight countries concerned have got time to find alternative suppliers, potentially even in the U.S.,' Bain said.
'So when it [sanctions] actually happens, it won't be so disruptive. That would be another reason for him [Trump] to encourage OPEC to keep output high, so they can fill the gap,' she explained.
- Trump takes credit for low prices
Combined with waivers, rising U.S. oil production and an increase in the supply glut drove crude prices to enter bear market territory at the end of October.
Brent crude lost around 19 percent since then to reach as low as $68.88 a barrel on Monday, Nov. 12 and marked its lowest level since Apr. 10. WTI also plummeted 13 percent to reach as low as $58.69 a barrel on Monday -- its lowest level since Feb. 14.
During that period, gasoline prices also showed a decline in the U.S. to $2.75 per gallon (3.78 liters) for the week beginning Nov. 5, from $2.90 per gallon for the week beginning Oct. 8, according to data released by the U.S.' Energy Information Administration (EIA).
Trump, of course, took credit, although the Republicans lost their control of the House of Representatives in the midterm elections.
'If you look at oil prices they've come down very substantially over the last couple of months,' he said in a press conference the next day.
'That's because of me. Because you have a monopoly called OPEC, and I don't like that monopoly,' he added.
- Economic growth
High oil prices hurt overall economic growth, especially for countries that are highly dependent on crude importers, such as the U.S.
Bain said another reason for Trump seeking low oil prices was the potential negative impact on the American economy.
'High oil prices are quite negative for global growth and inflation more generally,' she said. 'If we have high global oil prices for a long time, then we wouldn't start to see U.S. growth.'
As the world's biggest economy, the U.S. still remains the world's biggest crude oil importer with 7.54 million bpd for the week ending Nov. 2.
The same week, the U.S. was ranked as the world's top crude producing country reaching an output of 11.6 million bpd. Russia's crude production is around 11.36 million bpd, while Saudi Arabia's output hovers around 10.6 million bpd.
By Ovunc Kutlu
Anadolu Agency
energy@aa.com.tr