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Trump blasts Saudi Arabia over oil

By Bloomberg

Published : Nov. 13, 2018 - 10:57

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President Donald Trump took aim at Saudi Arabia’s plan to cut oil production on Monday, injecting new tension into an already fraught alliance that has been clouded by US concerns over the killing of journalist Jamal Khashoggi and the ongoing conflict in Yemen.

Trump’s efforts to influence oil production threatens to further strain relations between the two historic allies, even as his administration continues to describe the Saudis as a crucial partner in a shared bid to counter Iranian influence in the Middle East.

But the US president -- facing pressure after Republican losses in the midterm elections -- is eager to tamp down threats to the economy, including higher gas prices. In a series of tweets, Trump blamed a stock market sell-off on the Democratic victory while pressing the Saudis and OPEC to keep oil production at current levels.

“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” Trump said on Twitter.


(Bloomberg) (Bloomberg)

Trump posted the message hours after Saudi Arabia’s energy minister said that OPEC and its allies should reverse about half the increase in oil output they made earlier this year. Oil futures had gained as much as 2.4 percent in London and 1.8 percent in New York after the Saudi announcement.

Oil futures in New York fell 0.4 percent Monday, extending a record 11th day of declines, to end the session at $59.93 a barrel.

Trump risks testing Saudi patience -- or even provoking the kingdom’s ire -- at a particularly vulnerable moment, with the US decision to reimpose sanctions on Iran threatening to increase prices. The administration had been counting on Saudi Arabia to ensure oil supply to prevent a run-up in prices.

The two countries have also clashed over the October killing of US-based journalist Jamal Khashoggi at the Saudi consulate in Istanbul, with the Trump administration reportedly considering sanctions on some Saudi officials in response. Over the weekend, the US stopped its refueling support for the Saudi-led coalition fighting against Houthi rebels in Yemen.

The Saudis said in a statement the decision to end refueling flights was a mutual one, and that the kingdom “increased its capability to independently conduct inflight refueling in Yemen.” And Trump isn’t expected to impose drastic penalties over the Khashoggi killing, saying earlier this month that he did not feel “betrayed” by the plot and reiterating his desire to avoid consequences that could harm the US economy.

Still, the president is likely aware that his statement could irritate Saudi leadership. His tweet posted just minutes after a Fox Business Network segment in which energy analyst Phil Flynn said OPEC leaders were angry Trump had “duped” them into raising production ahead of the Iranian sanctions.

And the changes in posture by a Trump administration that had previously given Riyadh a pass on a range of international issues could prove an irritant in a relationship that has been carefully cultivated by the president and his son-in-law, Jared Kushner. The interference in oil matters risks overreach in a relationship Trump has leveraged to his advantage in the past.

In June, Saudi Arabia persuaded fellow oil producers to end 18 months of production cuts and pump more crude in response to falling output in Venezuela and Iran. OPEC leaders made clear Trump’s social media posts were the impetus for the production changes, which kept oil prices low ahead of both the midterm elections and Trump’s expected move to reimpose sanctions on Iran.

“We were in the meeting in Jeddah, when we read the tweet,” OPEC Secretary General Mohammad Barkindo said earlier this year. “I think I was prodded by his excellency Khalid Al-Falih that probably there was a need for us to respond,” he said. “We in OPEC always pride ourselves as friends of the United States.”

Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said Monday in Abu Dhabi. The kingdom will reduce shipments by about half that amount next month, he said.

This time, Saudi Arabia is urging allies to focus on the risk of rising oil inventories and forecasts for massive growth in rival supplies next year including US shale. It’s a concern shared by Barkindo, who said Monday that the market balance is under threat from surplus supply and dwindling demand.

“It is beginning to look alarming in the sense that the resurgence of non-OPEC supply -- in particular shale oil from the United States -- is putting a lot of pressure on this fragile equation,” Barkindo said in Abu Dhabi.

A cut in oil exports by Saudi Arabia -- or a rise in oil prices -- does threaten to provide political ammunition to newly empowered Democrats who have long signaled skepticism of OPEC.

Senate Minority Leader Chuck Schumer, a New York Democrat, had previously supported legislation that would remove an existing immunity shield that prevents the oil cartel and its members’ national oil companies from being sued under US antitrust law. It’s possible a more serious split between the Trump Administration and the Saudis could give new momentum for such an effort, which failed after former President George W. Bush threatened to veto it.

Trump may also find a familiar ally in his effort to pressure the Saudis: Russian President Vladimir Putin. Russia has argued that the oil supply excess is short term and has opposed production cuts, pitting it against the Saudis in an industry that dominates the economies of both countries.

The Russian and US presidents met briefly at a lunch Sunday in Paris, where Saudi Arabian issues were discussed, according to White House press secretary Sarah Sanders. The two leaders are expected to meet again at the end of the month at the G-20 summit in Argentina. (Bloomberg)