President Donald Trump criticized Saudi Arabia’s announced plan to cut oil production on Monday, as tensions rose between the U.S. and its long-time Middle East ally.
“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” Trump said in a tweet.
West Texas Intermediate, the U.S. benchmark oil price, had been declining for the hour before the tweet and briefly dipped lower before trading at $60.14 a barrel, down 5 cents for the day at 1:49 p.m. in New York.
Saudi Arabia’s energy minister said earlier Monday that OPEC and its allies should reverse about half the increase in oil output they made earlier this year. Oil futures in New York had gained as much as 2.4 percent in London and 1.8 percent in New York after the Saudi announcement.
Trump’s tweet comes one week after the U.S. reimposed sanctions on Iran’s oil industry. The administration had been counting on Saudi Arabia to assure oil supply to prevent a run-up in prices.
The two countries have clashed over the October killing of U.S.-based journalist Jamal Khashoggi at the Saudi consulate in Istanbul. Over the weekend, the U.S. stopped its refueling support for the Saudi-led coalition fighting against Houthi rebels in Yemen.
Trump’s attention Monday was on financial markets. Earlier in the day, he blamed a drop in the U.S. stock market on the looming threat of investigations into his administration by Democrats, who last week won control of the House of Representatives.
Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi. The kingdom will reduce shipments by about half that amount next month, making its second policy U-turn after a summer surge in prices was followed by a swift collapse into a bear market this month.
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.
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 U.S. shale. It’s a concern shared by OPEC Secretary-General Mohammad 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.