Markets

Oil Prices Are Too High

Oil Prices Are Too High

President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE focused on high oil prices in a tweet on Wednesday, again laying blame on OPEC.

The world's top crude producers are key partners in the OPEC+ deal, which is created to prop up oil prices by cutting global output.

Global oil demand is expected to increase next year, according to a first estimate from the International Energy Agency (IEA), despite lower production coming from some leading producers.

Donald Trump and Iran exchanged sharp words over oil prices on Wednesday, with Tehran accusing the US president of contributing to volatile prices after he withdraw from a global nuclear arms deal last month.

The oil supply deal is set to continue through the end of 2018, but plans for its continuation were unclear for next year. On April 20, Donald Trump took to Twitter to lambaste the cartel's push for higher prices. Its main concerns are higher oil prices and trade disruptions. The calculus changed, however, after Trump announced in May that the United States was pulling out of the 2015 deal that restricted Iran's nuclear program in exchange for the removal of sanctions.

Non-Opec growth for 2019 also includes a modest increase from Russian Federation "reflecting a possible contribution to compensating for lost production from Iran and Venezuela", analysts said.

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OPEC will meet on June 22-23 to discuss the potential of reducing its output cuts now that the market is more in balance.

However, it is unclear whether other nations will commit to raising production.

USA ally Saudi Arabia remains OPEC's most powerful member - with enough production capacity to manipulate global supplies.

To make up for the losses, the IEA estimated that Middle East Opec countries could increase production in fairly short order by about 1.1 million bpd. Prices nationwide have edged up toward $3 a gallon as the USA hits its peak summer travel season, still less than the $4 a gallon in 2008 during the 2007-2009 Great Recession.

Trump drew lots of tweeted responses, including one from oil hedge fund founder Pierre Andurand, who expects prices will be above US$150 a barrel in less than two years.