Trump takes credit from oil prices now that the stock market is down

President Donald Trump has found a new privileged measure for his presidency now that the stock market has become so tumultuous: oil prices.

Trump spent a good part of the first two years of his tenure commending the smooth running of the stock market, boasting of adding billions of dollars in wealth and to predict the Republican tax reduction bill would push stocks even higher. But markets have recently weakened, with major US stock indexes making the bulk of their gains from 2018.

So, Trump has moved to a new metric and bragged about how he keeps oil prices down. He has made several tweets about this in recent weeks.

"So that oil prices are going down (thanks to President T)," he said. tweeted during the Thanksgiving weekend.

Before the holidays, he apologized for keeping gas prices so low that he caused traffic jams. He also criticized the "Fake News Media" for not having credited it.

On the same day, he thanked Saudi Arabia for the low oil prices in a tweet. It was the day after he said in a statement that he would remain loyal to the Saudi leadership despite evidence that she was behind the murder of journalist and dissident Jamal Khashoggi. October.

But just like tying his presidency on the stock market, linking it to the price of oil is a bad idea because there are a lot of things that have nothing to do with it.

"There are so many variables that affect oil prices that almost none of them are under its control, so fearing a price drop will inevitably come back when the price rises again," said Ashley Petersen, Senior Analyst. from the oil market to Energy Advisory. Stratas Advisors firm, I said.

And while low oil prices can make consumers happy because they keep gas prices down, they do not really excite the oil and gas industry, another key element of Trump.

Some The rise in oil prices has something to do with Trump. But not really good things.

In October, the price of a barrel of oil was $ 80 per barrel, which might suggest that it could reach $ 100. But in recent weeks, things have changed and are now around $ 50.

Sarah McFarlane and Pat Minczeski of the Wall Street Journal announced Tuesday that several factors were at stake. World oil supply outstrips demand at this time, oil stocks (mostly the amount of oil stored) are increasing and the United States increases the amount of oil pumped. There is also more Iranian oil on the market than expected, and Russia and Saudi Arabia have also increased their production.

Most of this has nothing to do with President Trump. Some do it, but not in a positive way.

The main factor related to Trump is, perhaps surprisingly, Iran. Trump withdrew the United States from the agreement with Iran last spring and reimposed sanctions on the country this month, but with one caveat: the United States granted exemptions to eight countries allowing them at least to continue temporarily buying oil from Iran, including China, India and South Korea. . The disclaimers are pretty open, Peterson said, and they have no specifications regarding withdrawal periods or volumes.

Trump had already been pushing Saudi Arabia will maintain its stock, possibly to help close the gap if Iran's supply is cut. But since Iranian oil is not out of the market, it has raised concerns about oversupply.

Trump's trade disputes do not help either, as they could slow down economic growth and, as a result, hurt demand. It also lowers prices.

"It could be said that he helped lower oil prices, but he did it by being weaker than expected on a country that he qualifies as the enemy of the country." America and potentially hampering economic growth through a trade war with China, "said Petersen. "Not really bragging points."

We do not know where oil prices are going. OPEC and its partners will meet in Austria on December 6 and, according to Reuters, they discuss a proposal to cut oil production in order to keep prices from falling further. If Saudi Arabia, the de facto leader of OPEC, accepts such a plan (Trump insisted that he does not), it would probably drive up prices. Saudi Arabia and Russia could also try to convince Trump to cut production at the G20 meeting this week in Argentina.

"I think the markets are waiting to see what happens with the G20 and also with the OPEC meeting next week," said Petersen. "Assuming that OPEC is firmly planning to maintain control of its supplies and not flood the market, prices should rise to a more reasonable range of between $ 70 and $ 75 per barrel."

Low oil prices are good for Trump, and they are not

Low oil prices are good for the populist version of Trump: they keep gas prices low, giving consumers more money. But for the friendly version of the president, the scenario is more complicated. Trump has positioned itself as a champion of the oil and gas industry, many of whose segments are not thrilled with the low price of oil.

Jeff Currie, an analyst at Goldman Sachs, warned this week in an interview with CNBC that the price of oil at $ 50, where it currently stands, is a "mess in the cost structure of the US industry" and " not good "for the country.

Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, echoed this concern in a separate interview with the point-of-sale.

"You are in a situation where, if President Trump really wants prices to continue to fall, it will really hurt the American shale industry," she said.

US drillers can withstand lower oil prices better than their international competitors, especially since the United States lifted its 40-year oil export ban in 2015, under the aegis of Trump's predecessor, the United States. President Barack Obama. But they still do not want them to stay low for too long.

Trump tie his presidency to things beyond his control is not a good idea

Whatever the price of oil, whether it's good or not, Trump does not take into account its success, but it can not really control it's not the best way to govern. But that 's Trump, he often moves goal posts, modifies metrics or finds somebody else to blame.

Trump has already identified scapegoats for recent stock market issues. Shortly after the mid-term elections, he claimed on Twitter that the markets were nervous because the Democrats had taken over the House of Representatives. The previous month, he had blamed the US Federal Reserve for raising interest rates.

The WSJ reported this weekend that Trump was now angry with Treasury Secretary Steven Mnuchin for the way things were going on Wall Street and had "expressed dissatisfaction" with the stock market turbulence.

Some of the gains in the stock market after 2016 were related to Trump; some were not. The same goes for its recent declines. The one whom the President reproaches makes no difference.

And just as the stock market has finally stopped doing what the president wants, so does the price of oil. And we'll be back here.