Oil prices fall as Trump reiterates his call for OPEC price cuts
Oil prices fell on Monday, after U.S. president Trump asked OPEC for a reduction in prices in response to his announcement that he would take a wide range of measures to increase U.S. oil production and gas output during his first week as president.
Brent crude futures fell 53 cents or 0.68% to $77.97 per barrel at 0430 GMT, after closing up 21 cents Friday.
U.S. West Texas Intermediate Crude was $74.16 per barrel, down by 50 cents or 0.67%.
Trump reiterated on Friday his call to the Organization of the Petroleum Exporting Countries (OPEC) to reduce oil prices in order to harm oil-rich Russia and bring an end the war in Ukraine.
Trump said that OPEC should drop its oil prices and stop making so much profit. "That war will end right away," Trump stated.
Trump also warned that he would hit Russia and "other participating countries" with tariffs, taxes and sanctions if an agreement to end the conflict in Ukraine was not reached soon.
On Friday, Russian President Vladimir Putin suggested that he meet with Trump to discuss the Ukraine conflict and energy prices.
John Driscoll, a Singapore-based consultant at JTD Energy, said that they are positioning themselves for negotiations. This creates volatility on the oil markets.
He said that the oil market is probably slightly skewed to the downside due to Trump's policies, which are aimed at increasing U.S. production as he tries to secure overseas markets.
Driscoll stated that "he will want to take some market share from OPEC, so in this sense he is a competitor."
OPEC, its allies, including Russia, have not yet responded to Trump's request. OPEC+ delegates, however, pointed to a plan that was already in place for increasing oil production from April.
Last week, both benchmarks saw their first decline in over five weeks as fears about Russian sanctions disrupting supply eased.
Goldman Sachs analysts have said that they do not anticipate a major impact on Russian production. This is because higher freight rates are encouraging more non-sanctioned vessels to transport Russian oil, while the deeper discount offered for the Russian ESPO grade oil will encourage price-sensitive buyers continue to purchase the oil.
As the ultimate goal of the sanctions is to decrease Russian oil revenues we assume that Western policymakers would prioritize maximising discounts on Russian barrels rather than reducing Russian volume," the analysts wrote in a report.
Analysts at JP Morgan said that a risk premium was justified, given the fact that sanctions are currently in place on nearly 20% of Aframax's global fleet.
In a letter, they said that sanctions against the Russian energy sector could be used as leverage for future negotiations. This indicates that a risk premium of zero is not appropriate.
The White House announced late Sunday that the U.S. quickly reversed its plans to impose tariffs and sanctions on Colombia after the South American country agreed to accept migrants deported from the United States.
According to Kpler, data shows that sanctions could have affected oil supplies, since Colombia exported 41% of its crude oil by sea to the U.S. last year.
(source: Reuters)
