The price of oil down: Trump praises and extorts the Saudis

economy

Wednesday, November 28, 2018

By Daniel Saurenz and Benjamin Feingold

The oil market is in panic, prices are collapsing. Saudi Arabia is facing a dilemma: falling prices have dug a hole in the treasure. But stifling promotion would anger the most important ally.

Between the Capitol, seat of the US Senate and the White House in Washington, are about two kilometers. However, regarding the Saudi partner's controversial tone, Saudi Arabia, there are currently conflicting worlds between senators and the US president: while parliamentarians from the Capitol were discussing sanctions against several Saudis for the badbadination of regime critic Jamal Khashoggi, Donald Trump sent a happy message Riyadh: He thanked the kingdom for lowering oil prices and encouraged the Saudis to further lower prices.

The US President is obviously so excited about what has happened on the oil market in recent weeks that all political and moral considerations are behind it all. Almost panicked, investors sold oil, after which the price fell to its lowest level in 13 months.

The news has recently led to a drop in prices, according to which Saudi Arabia has again increased production, reaching a record 11.1 million barrels a day this month, an increase of 500,000 barrels per day compared to October. This fueled the fears of investors, who feared oversupply in the global market.

The additional selling pressure on oil prices also pushed Russia, Saudi Arabia's main "no" opte partner, to increase production to 11.4 million barrels a day. "This is the highest value since the end of the Soviet Union," says Jochen Stanzl, chief strategist of CMC Markets, in an interview at n-tv.de. "This worsens the oil spill on the market, especially since US production is 11.7 million barrels a day."

This overabundance and, subsequently, the downward trend in prices are severely upsetting Saudi Arabia. On the one hand, the country needs money to finance the state's high spending. On the other hand, the leaders of Opec can not afford to divert the American president. It's more than ever today, Trump being the one and only ally in the case of the murdered journalist, Jamal Khashoggi, who protects the Saudi royal family.

Trump aims for even lower prices

The encouraging tweet towards the partners clearly indicates what Trump is waiting for in exchange for Saudi Arabia: an uncontrolled promotion despite falling prices. They should still fall after Trump's performance. This, says the president, acts as a tax break for the US economy: consumers have more money in their pockets and could consume more.

This Washington saying and the tragic plight of the Saudis are likely to make the G20 meeting exciting on November 30 and December 1 in Buenos Aires. Not only did it mean reaching the summit between Trump and his Chinese counterpart Xi Jinping, but also, according to a press article, a meeting between Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin. As a result, both partners wish to discuss a possible funding cut and thus prepare an agreement at the OPEC meeting in Vienna on December 6th.

"The derivatives market should already lower the price of oil," says Heiko Geiger, derivatives specialist at Bank Vontobel, about the current state of the oil market. "A few weeks ago, future oil prices were expected to fall in Brent and WTI," says Geiger. At that time, however, the price of oil was also significantly higher.

But the price of oil suffers more and more headwinds not only to the supply but also to the demand. More recently, the PMI for the global industry, published by the US bank JPMorgan and the UK research firm IHS Markit, dropped to 52.1 points, its lowest level in nearly two years. Thus, the index is gradually approaching the mark of 50 points, the limit between growth and contraction of the sector. Trump hopes to be able to prevent this critical threshold from being exceeded by applauding Ölföderer.

Source: n-tv.de