US President
Donald Trump has raised the stakes for a meeting of
an OPEC+ ministerial panel next month, with his call for
the group to lower oil prices. Just days
into his second term, Trump told world leaders gathered in Davos, Switzerland
that he would urge Saudi Arabia and its partners to “bring down the
cost of oil.”
Delegates from the
group said they would stick to their existing plans, but Trump’s intervention
at the World Economic Forum on Thursday adds significance to what had been
looking like a routine committee meeting to review policy on Feb. 3. The Organization of Petroleum Exporting
Countries and its allies have been withholding oil supplies for more two years
to shore up prices, and have repeatedly delayed a revival in their output.
They currently intend to gradually start restoring barrels in monthly tranches
of about 120,000 barrels a day from April.
Neither
Riyadh nor OPEC’s Vienna-based secretariat gave any indication that they would
expedite these plans in response to Trump’s demands. Delegates from the
alliance, who asked not to be identified, said they see no reason to deviate
from their current policy. Faltering fuel demand in China and plentiful new
supplies from across the Americas mean there is still the risk of an oil
surplus, they said.
Oil prices are trading
near $78 a barrel in London, up from the start of the year but still too low
for many members of the cartel to cover government spending. “OPEC+
seemingly has no appetite” to “put an additional barrels on the market,” said
Helima Croft, head of commodity strategy at RBC Capital Markets LLC...Other US polices could upend this outlook.
Sweeping new
US sanctions on Russia — another OPEC+ member — announced in the
final days of the Biden administration has spurred its customers in Asia to
scour for alternative supplies... “So
far we’re seeing no indications from OPEC that they are willing to backstop any
sanctions on Iran, Venezuela or Russia,” Natasha Kaneva, head of global
commodities strategy at JPMorgan Chase & Co., said in a Bloomberg
television interview.
OPEC+’s apparent
inclination to sit tight may be guided in large part by their previous
experiences with the president. Trump —
a fierce critic of the cartel for decades before his political career
— often berated OPEC+ with social media posts during his first term,
accusing the producers of keeping prices too high...The Biden administration’s
use of strategic oil reserves after Russia’s 2022 invasion of Ukraine was also
viewed critically.
“We don’t see OPEC+ making any policy changes in
response to these comments, especially at these price levels,” said Richard
Bronze, head of geopolitics at consultant Energy Aspects Ltd. “Memories of 2018
and 2022 are still too strong, so they will need to see sustained tightness
before agreeing to add supply.”
There are other
complications to consider, not least Trump’s pledge that his administration
will encourage American oil companies to “drill, baby, drill” and ensure US
dominance of the global energy system. Saudi Arabia’s Crown Prince Mohammed Bin Salman has also promised to
expand investments and trade with the US by $600 billion, and Trump said he
would pressure the crown prince to raise that figure to $1 trillion.
“It is challenging to
see how a significant drop in oil prices will yield a massive increase in US
output or hundreds of billions in foreign direct investment from key oil-producing
states,” said Croft.