Oil steadied after falling the most in almost a month on Monday, when President Donald Trump called on OPEC to temper prices.
Futures traded above $55 a barrel in New York after sliding 3.1 percent on Monday. While crude is still about 25 percent below the four-year high reached in October, the U.S. president tweeted on Monday that prices are rising too much and called on the Organization of Petroleum Exporting Countries to “relax and take it easy.” Oil’s recovery in 2019 has been propelled by output curbs by OPEC, with top member Saudi Arabia making the deepest cuts.
“The market was due a correction and Trump’s tweet did the trick,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “With the markets almost crazy focus on the potential for a trade deal, the negative growth momentum cannot be ignored.”
Last year, the Saudis obliged when Trump urged OPEC to open its taps as his administration sought to shrink Iranian exports to zero through sanctions. Prices subsequently slumped when the U.S. unexpectedly eased its hard-line demand that the Persian Gulf state’s customer halt all purchases.
That dealt a blow to the economies of OPEC members and they aren’t likely to repeat the mistake, according to two oil officials in the Gulf region who asked not to be identified. Still, investors are wary over whether OPEC will be able to defy Trump, who could enforce legislation that shakes the organization to its foundations. The Saudis, meanwhile, haven’t fully escaped the political backlash in the U.S. for the murder of Washington Post columnist Jamal Khashoggi.
West Texas Intermediate for April delivery traded at $55.50 a barrel on the New York Mercantile Exchange, up 4 cents, at 10:17 a.m. in London. The contract decreased $1.78 to $55.48 on Monday, the biggest loss since Jan. 28 to the lowest level since Feb. 14.
Brent for April settlement advanced 35 cents to $65.14 a barrel on the London-based ICE Futures Europe exchange. The contract dropped $2.36 to $64.76 on Monday. The global benchmark crude traded at a $9.59 premium over WTI.
OPEC and its allies including Russia began output cuts last month to prevent booming American shale-oil output creating a glut amid fragile global fuel demand. While that’s helped prices, growing optimism about a trade deal between the U.S. and China as well as America’s sanctions on Iran and Venezuela have also boosted crude. Goldman Sachs Group Inc. said this week, before Trump’s intervention, that Brent may take a fleeting trip to $70-$75 a barrel.
Other oil-market news: U.S. crude inventories probably rose 3 million barrels last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Wednesday confirms that, it will be the sixth consecutive weekly gain. Russia continued the gradual pace of its OPEC+ oil-output cuts in February, with official data showing a smaller reduction so far than Energy Minister Alexander Novak had promised. Venezuela is running out of space to store its sanction-stained crude that few dare to buy, forcing it to reduce output at a time when the world is thirsty for heavy, sulfurous oil. Libya’s state-run National Oil Corp. refused to restart the country’s biggest field after militants seized and declared it secure earlier this month. China’s purchases of crude from Venezuela rose by 50.7% in January from a month earlier to 1.74 million metric tons, according to data released Tuesday by the General Administration of Customs. The nation skipped imports from the U.S. The oil industry faces a “crisis of perception” and there’s a growing risk the financial community will turn against fossil fuels, the chief executive officer of Saudi Aramco said.