Losing room for manoeuvre
IT USED to be said that America’s shale producers were the new “swing factor” in global oil markets. It turns out that role is being taken by America’s president.
At a time when oil prices are at three-and-a-half-year highs, markets are being buffeted by three countervailing forces unleashed by President Donald Trump: his geopolitical agenda, particularly sanctions on Iran; his domestic political agenda, to lower American petrol prices before the mid-term elections; and his looming trade war with China. If he does not get his way, he may have a dangerous weapon up his sleeve—America’s Strategic Petroleum Reserve (SPR). His meddling risks making OPEC, the oil cartel that is a focus of his wrath, look like a paragon of predictability.
First, geopolitics. Despite an agreement late last month by Saudi-led OPEC and Russia to increase output by up to 1m barrels a day (b/d), the price of Brent crude, a benchmark, has risen to above $77 a barrel. The proximate cause this week was a brace of supply outages in Libya and Venezuela, both of which are in upheaval. But adding fuel to the price rally is the Trump administration’s pressure on America’s allies to cut oil imports from Iran to zero by November 4th, or risk punishment for violating American sanctions. This is more...Continue reading