Oil Prices Erase Recent Gain as Trump Blasts Saudi Production Policy
Crude oil suffered a fresh setback early Tuesday, as markets reacted to further fraying of U.S.-Saudi relations after President Donald Trump slammed the kingdom’s energy policy. Hours earlier, Saudi Arabia had announced it would cut crude production by 500,000 barrels per day in December in response to the recent plunge in prices.
Oil Prices Erase Gains
U.S. West Texas Intermediate (WTI) futures plunged to yearly lows on Tuesday, more than offsetting yesterday’s climb. The U.S. futures benchmark bottomed at $58.85 a barrel. It was last seen trading at $59.00 a barrel, down 93 cents, or 1.6%, from the previous close.
The WTI contract officially entered into bear-market territory earlier this month with losses exceeding 20% over the past six weeks. At the beginning of October, crude was tracking four-year highs. Now, prices are struggling to stave off further declines.
Declining crude prices follow a fresh surge in the U.S. dollar, which is currently tracking 16-month highs against a basket of its peers. The DXY dollar basket spiked 0.7% on Monday to 97.54. As a dollar-denominated asset, crude is highly sensitive to changes in the greenback’s value.
Trump Blasts Saudi Oil Policy
Saudi Arabia’s decision to scale back crude production has been met with heavy criticism by U.S. President Donald Trump. In a Monday afternoon tweet, Trump said the following:
“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”
The president’s comments came after the Saudis announced plans to lower crude supply by half a million barrels per day beginning next month. The decision was announced by Saudi energy minister Khalid Al Falih in Abu Dhabi following a meeting of OPEC members.
“The consensus among all members is that we need to do whatever it takes to balance the market,” Al Falih said, as quoted by CNN. “If that means trimming supply by a million [barrels per day], we will do it.”
President Trump is under pressure to keep the economy running strong following sizable losses in the House of Representatives during last week’s midterm election. Although the GOP under Trump performed much better than previous administrations, the loss of a House majority threatens to undermine the administration’s goals.
Washington was relying on Saudi Arabia to keep the global market well supplied, and oil prices down, in the wake of renewed sanctions on Iran. U.S.-Saudi relations have also deteriorated over the killing of journalist Jamal Khashoggi at the Saudi consulate in Turkey last month.
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