Trump tweets to cool prices, but cannot counter own policies: analysts
US President Donald Trump has attempted to lower oil prices through a few sharply-worded tweets aimed at OPEC. But his policies, particularly on Iran sanctions, have undermined any of his Twitter-led efforts, analysts and market observers told S&P Global Platts this week.
* President tries to deflect blame for rising oil prices
* Tweets seen as undermining US producers
* Trump has long history as OPEC critic
“I don’t see these tweets as effective,” former US Energy Secretary Bill Richardson told Platts Tuesday. “I think it gets the OPEC members, especially the Saudis, irritated and they feel pressured.”
During the Clinton administration, Richardson met privately with Ali Naimi, Saudi Arabia’s then-oil minister, and other OPEC representatives and encouraged them to keep prices stable through increased production. “I did it quietly, because I think if you do it openly, they feel pressured and it limits their ability to manage the situation.”
“He’s got bad policies if you want to bring the price of oil down,” said Andrew Holland, chief operating officer at the American Security Project in Washington. “Twitter seems to be Trump’s way of deflecting blame for high oil prices and trying to push it off on OPEC.”
Elizabeth Rosenberg, director of the energy program at the Center for a New American Security in Washington, sees Trump’s oil tweets as being designed to inflict more political than economic impact.
“It’s meant to demonstrate alliance with Saudi Arabia, who he clearly sees as a proxy for OPEC,” she said.
But Rosenberg said the tweets have undermined US producers — and the White House’s praise of supposed US “energy dominance” — in the process.
“It’s true that not every barrel is the same, but it’s a bold move for him to outright ignore the contribution of US producers in an election year during summer driving season,” she said. “He seems blissfully unaware that it’s an energy security ‘no-no’ to wholeheartedly embrace Saudi Arabia and OPEC to the exclusion of domestic production capacity.”
On Saturday, Trump tweeted that he had asked Saudi King Salman to increase oil output by as much as 2 million b/d to counter the impact of supply losses from Iran and Venezuela.
“He has agreed,” Trump tweeted of the Saudi ruler.
The tweet was the fourth Trump tweet since April 20 aimed at OPEC’s influence over oil prices.
“His primary objective is to lower the price at the pump for his voters ahead of mid-term [elections],” said Samir Madani, who helped create the Organization of Oil Trading Tweeters, or #OOTT, as it is known on Twitter.
But stabilizing prices with tweets will be “very difficult,” said Michael Cohen, head of energy commodities research at Barclays.
“There is a limit to the oil market’s fungibility and a limit to the availability of offsets when disruptions reach the levels we might see in the coming six months,” said Cohen.
Trump’s oil tweets, which White House officials have attempted to downplay, fall in line with past Trump statements on OPEC and the producers group’s influence on prices.
“As anyone with a brain knows, the reason gas prices are through the roof is because OPEC controls supply and therefore massively inflates crude oil prices,” Trump wrote in his 2011 book “Time to Get Tough: Making America #1 Again.”
In the book, Trump called for suing OPEC and even titled one section “Take On the Oil Thugs,’ and referred to OPEC as “Middle Eastern oil mobsters” and “shakedown artists.”
“We have to get tough on OPEC,” Trump wrote. “These oil thugs rip us off year after year.”
While Trump’s past OPEC comments may be more combative than those of previous presidents, blaming OPEC for high oil and gasoline prices is not new, said Holland. Every US president since Jimmy Carter has tried exerting influence on the Saudis and publicly condemned OPEC in an effort calm markets, he said.
“As a strategy it’s really not too different from previous presidents, it’s just on Twitter and with bad language,” Holland said.
Joe McMonigle, an analyst with Hedgeye Risk Management, said Trump’s latest tweet calling for 2 million b/d of new production from the Saudis messed with market expectations, as that level of increase is theoretically possible but not likely.
“At the end of the day, both he and the Saudis are aligned not just on Iran policy but also on prices,” McMonigle said.
Oil prices rose sharply last week after the State Department announced it would offer no waivers to Iran’s oil buyers, a hardline approach many allies did not expect after the Obama administration allowed them to continue some imports in 2012-2015 as long as they made significant cuts every six months.
Brian Hook, the US State Department’s director for policy planning, said Monday that State will work with some countries on a case-by-case basis to reduce their imports after sanctions resume November 4.
McMonigle sees the market — and Trump’s tweets to the Saudis — getting smoothed out in July and August.
“He’s obviously concerned about oil prices from a political standpoint, and I think the Saudis are also concerned about it — not just because of the pressure from Trump — but they don’t want to see prices to go into the $90s to $100,” he said. “They would view that as very detrimental to consumers and they don’t want a repeat performance of the last time prices were at that level.”
The Saudis will try to do whatever they can to keep prices as stable as they can, McMonigle said.
“That’s at least the goal, and I think Trump shares the goal,” he said. “They’re aligned and ultimately I think it will work itself out. But in the meantime it’s created some turmoil in the markets.”