Oil prices fall as Trump urges Opec not to cut supply

London — Oil prices fell more than 1% on Tuesday, with benchmark Brent crude slipping below $70 a barrel and US crude under $60, after US President Donald Trump put pressure on oil cartel Opec not to cut supply to prop up the market.

The dollar hovered near 16-month highs, making oil more expensive for importers using other currencies.

Brent was down $1.03 at $69.09 a barrel by 9am GMT. US light crude was $1.00 lower at $58.93. Both benchmarks are down 20% since peaking at four-year highs in early October.

“Sky-high production in the US, coupled with incremental barrels coming from Saudi Arabia and Russia, is starting to impact oil market balances,” Bank of America Merrill Lynch analysts said in a note to clients, adding, “Crude oil inventories are starting to increase once again.”

Trump has made it clear he wants oil prices to fall.

“Hopefully, Saudi Arabia and Opec will not be cutting oil production. Oil prices should be much lower based on supply!” the president said in a Twitter post on Monday. This led to a sharp price drop on Monday and the sell-off continued into Tuesday.

“This tweet certainly did not help prices,” ING commodities strategist Warren Patterson said.

Extraction from American shale fields over the past decade has propelled US oil production to record highs this year with crude output now at 11.6-million barrels per day (bpd), helping make the US self-sufficient in energy. Merrill Lynch says US crude production will break through 12-million bpd in 2019, supporting oil exports to the rest of the world.

Oil production is not just rising in the US; Kazakhstan said on Tuesday its oil output rose 4.8% to 74.5-million tonnes in the first 10 months of 2018, equivalent to 1.82-million bpd.

Top crude exporter Saudi Arabia has watched with alarm how supply has started to outpace consumption, fearing a repeat of a glut that brought a price crash in 2014. Saudi energy minister Khalid al-Falih said on Monday that Opec countries agreed there was a need to cut oil supply next year by about 1-million bpd from October levels to prevent oversupply.

Dutch bank ING said an abundance of global supply, as well as the threat of an economic slowdown, meant “cuts over 2019 are unavoidable. It is becoming clearer that, as we move closer towards 2019, the market will see a sizeable surplus, at least over the first half of 2019.” 

Reuters