Oil Settles Slightly Higher, Torn Between OPEC Meeting and Trump Comments
April 20 2018 - 4:13PM
Dow Jones News
By Georgi Kantchev and Christopher Alessi
Oil prices closed little changed Friday, pulled between comments
from President Donald Trump that high crude prices "will not be
accepted" and a meeting between major oil producers where they
recommitted to limiting output.
Light, sweet crude for May delivery settled up 9 cents, or 0.1%,
at $68.38 a barrel on the New York Mercantile Exchange, hovering
near their highest close in more than three years. Brent, the
global benchmark, rose 28 cents, or 0.4%, to $74.06 a barrel.
Oil sold off after Mr. Trump tweeted, "Oil prices are
artificially Very High! No good and will not be accepted!"
The president's comments came as the Organization of the
Petroleum Exporting Countries and other major producers outside the
cartel, including Russia, gather in Jeddah, Saudi Arabia, to assess
compliance with a coordinated plan to hold back crude
production.
Responding to Mr. Trump's tweet on the sidelines of the
ministerial monitoring meeting, Saudi Arabian Oil Minister Khalid
al-Falih -- the de facto head of OPEC -- said "there is no such
thing as an artificial price." Markets, he added, "determine
prices."
Earlier in the day, Mr. Falih said OPEC output reductions were
"far from over." His Russian counterpart, Alexander Novak, said his
country was committed to complying completely with agreed cuts.
OPEC and 10 producers outside the cartel have been holding back
oil output by around 1.8 million barrels a day since the start of
2017. The deal is set to expire at the end of this year, but Saudi
Arabia has indicated the participants could continue to hold back
output into 2019.
Mr. Trump's options to influence crude prices are limited since
U.S. oil production depends on scores of independent producers
rather than a state-owned oil company like those in OPEC, analysts
said.
"There's very little he can really do, unlike the Saudis who
control their own output" said Tom Pugh, a commodities economist at
Capital Economics. "And it's just a tweet for now, we have to see
if this becomes a theme."
Mr. Pugh said Mr. Trump could sell oil from the U.S. Strategic
Petroleum Reserve or try to pressure Saudi Arabia to exit a deal to
limit production, but neither measures are likely to succeed.
OPEC's secretary-general, Mohammed Barkindo, said Friday that
the U.S. oil industry "is benefiting" from the OPEC production
cuts. Indeed, higher prices have incentivized U.S. shale oil
producers to ramp up production over the past year, breathing new
life into an industry that had been weighed down by excess global
supply and low prices, analysts say.
OPEC and its external allies achieved more than 140% of their
agreed oil-production cuts in March, officials at the meeting said.
That contributed to rebalancing the market after a three-year glut
and helped send the oil price on a rally that has added over 125%
to the price of brent since January 2016.
In April, geopolitical tensions in the Middle East have largely
driven the price, not least after a U.S.-led strike on the Syrian
regime last week. Investors are also monitoring the U.S. stance on
the international nuclear agreement with Iran, due for review in
May. A reinstatement of sanctions could hit oil production and
reduce global supply from one of OPEC's largest members.
Brent is "ticking higher by the day, as OPEC cuts are intact,
global oil demand growth is firm, Venezuela oil production is in a
death spiral, renewed Iran sanctions are imminent and sanctions
toward Russia on oil and not just aluminum is possible," said
Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Gasoline futures settled up 0.9% to $2.0959 a gallon and diesel
futures settled up 0.6% at $2.1230 a gallon.
Stephanie Yang contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and
Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
April 20, 2018 15:58 ET (19:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.