Iran's OPEC Boss Says Trump's Tweets Have Added $10 to Oil Prices

Iran's OPEC governor Hossein Kazempour Ardebili

Iran's OPEC governor Hossein Kazempour Ardebili

U.S. President Donald Trump again accused the Organization of the Petroleum Exporting Countries of driving gasoline prices higher on Wednesday and urged the oil producer group to do more.

Brent for September settlement advanced 46 cents to end the session at US$77.76 a barrel on the London-based ICE Futures Europe exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.24% at $74.32 a barrel.

While Trump says he wants lower oil prices, United States sanctions against OPEC members Iran and Venezuela are adding uncertainty to the market, causing prices to spike.

Trump also tweeted on the topic two weeks ago saying he hoped OPEC would increase production in an effort to keep prices down.

At their meeting in Vienna last month, OPEC countries and key ally Russian Federation said they will raise production by a million barrels per day, but analysts are concerned it may not be enough for oil prices to spiral out of control, at least until new USA shale production comes on stream. Inventories at Cushing, Oklahoma, fell 2 million barrels last week, according to a separate forecast compiled by Bloomberg.

Currently, prices are being propped up by supply disruptions in Canada, Libya and Venezuela as well as looming sanctions against Iran, which could remove as much as 3.8 million barrels per day of crude oil from the market.

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Historically that has been the case, and with Saudi production already at record levels, Trump's expectation that the Saudis will make up for Iran's shortfalls are not realistic.

OPEC and Russian Federation said in June they were willing to raise output to address concerns of supply shortages due to unplanned disruptions from Venezuela to Libya, and likely also to replace a potential fall in Iranian supplies due to US sanctions.

Vijay Valecha, chief market analyst at Century Financial Brokers, said the UAE's crude oil production peaked in October 2016 at 3.13 million bpd and has declined since then in line with the Opec production cuts.

In May, US President Donald Trump pulled out of a multinational deal under which sanctions on Iran were lifted in return for curbs to its nuclear programme. Americans pay the second-lowest price per gallon among major economies.

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.

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