Saudi Arabia raised oil output by around 500,000 bpd in June

Roman Schwartz
July 7, 2018

U.S. West Texas Intermediate (WTI) futures were down 15 cents, or 0.2 percent, at $72.79.

President Trump has also been busy tweeting his irritation at OPEC, saying the cartel is not doing enough to keep oil prices in check.

High oil prices make fracking more economically viable for the United States, now the third largest producer of oil worldwide.

"This must be a two way street", he wrote, adding in block capitals, "REDUCE PRICING NOW!" That may reduce the pressure on Saudi Arabia to keep oil prices high, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.

OPEC, together with a group of non-OPEC producers led by Russian Federation, reduced output in 2017 to prop up the market.

The head of Iran's Revolutionary Guards said on Thursday their forces were ready to implement Iran's threat to block the Strait of Hormuz and that if Iran can not sell its oil under the USA pressure, no other regional country will be allowed to.

Antoine Halff, formerly a chief oil market analyst at the International Energy Agency and now senior fellow at Columbia University, said that Trump made three errors in his tweet: OPEC can influence market prices but is not a monopoly.

Trump in an earlier tweet and in an interview on Fox News last Sunday said he wanted oil exporters to provide an additional 2 million barrels a day of production. The kingdom faces intense political pressure as prices reach levels that threaten economic growth, and as American sanctions on Iranian oil exports require replacement barrels to prevent a supply squeeze.

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In response to those tariffs, Canada responded with a $16 billion retaliatory set of tariffs on everything from iron to playing cards.

OPEC's de facto leader Saudi Arabia told the group it pumped 10.5 million barrels a day in June, about 500,000 more than the previous month, according to people familiar with the matter. Speaking Thursday, Hossein Kazempour Ardebili, the Iranian governor to OPEC, said the US president was ill-informed on OPEC policies.

But strong personal relationships between the leaders and agreement on the overall deal obscure disagreement on some key details, not least the desirable level for oil prices.

Here is a look at how share prices for two blue-chip stocks and two exchange-traded funds reacted to this latest report.

On Tuesday, Morgan Stanley raised its Brent forecast to US$85 per barrel, from US$77.5, citing concerns that the United States may succeed in blocking much of Iran's 2.7 million barrels per day.

Oil prices have been buoyed by tightening supplies this year but there are signs demand may now be easing.

Iran's deputy commander of the Sarollah Revolutionary Guards said on Wednesday that any attempt to thwart its oil exports will result in the closure of Strait of Hormuz, the narrow waterway at the mouth of the Persian Gulf, where the world's biggest concentration of tankers carry about 30 percent of all seaborne-traded crude oil and other liquids during the year.

Saudi Arabia has wanted to sell shares in Aramco to bring in foreign investment to diversify its economy, but legal concerns about listing in places like London or NY have presented complications.

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