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In November 2018, Donald Trump tweeted: "Oil prices are falling … a tax cut for America and the world! Enjoy! 54 dollars … Thanks to Saudi Arabia. "
Five months later, with oil prices over $ 70, Trump will have less festive atmosphere as OPEC oil ministers and their allies meet Friday in Jeddah, without Iran. The main agenda item will be the implications for oil of three interconnected US foreign policy crises – in Venezuela, Iran and Libya. Together, these crises, which are occurring simultaneously, have the potential to eliminate up to 3.5 million barrels of oil per day from the markets.
It is rare that a foreign policy of the United States had as much potential to cause such a disruption of the oil markets and, consequently, to leave as much market power to the US allies in the Gulf to exploit this belligerent .
Energy ministers will be in the enviable position of being able to keep up with the expected demand for oil for the rest of the year, just as US foreign policy is imposing a contraction in supply.
The prospect is that the price of oil – which has already risen by 40% this year to over $ 72 a barrel – could rise much higher.
For Saudi Arabia, needing a price of oil above $ 80 a barrel (between $ 85 and $ 87 for the current year) to balance its budget is a welcome gift.
The fact that countries acclaiming Republican hawks are benefiting mainly from rising oil prices is not lost to oil producers in the crossfire of US foreign policy, including Libya and Iran.
Indeed, the risks to the oil market and the global economy from three simultaneous disruptions have become a point of pressure for Iranians and Libyans as they urge Europe to challenge US policy.
Of the three oil-producing countries facing US pressure, Iran is the most powerless against its oil exports.
Iran's peak oil production reached 3.83 million barrels per day in 2017 and is now well below 2.5 million barrels per day. By stopping unexpectedly all sanctions derogations on Iranian oil exports, the United States said last month that they wanted to drive Iranian exports to zero. Iran has so far unsuccessfully tried to persuade reluctant India and China, the two largest importers of Iranian oil, to risk US sanctions and continue to buy. The same applies to Turkey.
Iran expects to survive with exports of 1.5 million bpd, but the IEA has forecast this week that summer sales are expected to fall below 0.7 million bpd, the lowest level ever since. the Iran-Iraq war in the 1980s. a figure that would jeopardize the Iran nuclear deal.
In Venezuela, production peaked at about 2.60 million barrels per day in early 2012, but has steadily declined to 0.80 million barrels due to US sanctions, mainly from August onwards. 2017, poor long-term management and, more recently, blackouts. There is no indication that the United States will lift the sanctions until the disputed President Nicolás Maduro clings to power with Russia's support.
In Libya, the National Oil Corporation planned to increase production to 1.4 million b / d by the end of the year, but this seems optimistic given General Haftar's attack on Tripoli. Trump would have undeniably attacked this attack as a result of lobbying for Haftar in favor of Saudi Arabia.
Production is currently 1.17 million bpd, and most oil fields are under the control of Haftar's forces but are deeply vulnerable to attack. Mistratan's forces, opposed to Haftar, can easily use the coastal road to reach the Libyan oil-growing facilities, which produce 585,000 b / d.
Mustafa Sanalla, president of the Libyan National Oil Corporation, one of the few genuinely national institutions in the country, said: "I can not anticipate any scenario other than an immediate ceasefire in which exports Libyan oil will not be hard hit by the conflict. . "
Thus, the cumulative impact of the three US interventions, or in the case of Libya's non-intervention, is that the markets could be deprived of 3.5 million bpd.
The question is simply how Saudi Arabia chooses to profit from the American policy it has defended, for example by intervening to supply former Iranian customers or taking advantage of the price increase. It is possible that they try both. Until now, the Saudis have resisted Trump's call to increase production, saying the stocks were large enough.
In the Asian markets, Saudi Aramco's domestic oil giant has already raised its official June sale price of its largest crude Arab Light, the highest benchmark against the Middle East benchmark prices since 11 month. The cost of the Arab Medium variety has been set at the highest since December 2013, while Arab Heavy has been maximized for more than six years.
But the Saudis know that the crises that multiply in Trump can not become a shameless personal model. The Saudi royal family is committed to ensuring that the sanctions against Iran do not lead to an oil shortage and, by June, its energy ministers will be under pressure of Trump to increase its production. A massive oil shock this fall would simply lead American consumers to shale markets, renewable energy and Democrats.
As a British minister said this week, "the risk that this turns out to be unmanageable and we explode to the figure increases". In a current volatility index, oil prices rose more than 1% on Tuesday when Saudi Arabia claimed explosive-laden drones launched by a Yemeni-aligned armed movement lined up in Iran. had attacked oil pipelines owned by the state oil company Aramco. The withdrawal of US diplomats from Iraq has led to a further rise.
Similarly, unexplained acts of sabotage on commercial and civilian ships near the United Arab Emirates' territorial waters this weekend scared the markets and rekindled the memory of the wars with oil tankers of the 1980s.
Even though Iran was not directly involved in the attacks, it woke up the periodic fear that Tehran is seeking to close the Strait of Ormuz, the two-mile-wide shipping lane through which a fifth of oil production passes from the Gulf to larger markets. . Push Iran too far, and it may not be just the nuclear agreement that will be closed.
Energy markets are not a zero-sum game in which everything depends on Saudi decisions. There are many moving and opposite parts. But it is striking, and perhaps unwise, to see how much Trump's national security adviser, John Bolton, has chosen to make the United States so dependent on its allies. of the Gulf, and to what extent these allies could benefit.
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