The euphoria over rising oil prices is nearly gone as OPEC and non-OPEC countries are considering boosting oil production amid a sharp rise in the price of gasoline.
On June 5 Bloomberg broke that the Trump administration "quietly asked Saudi Arabia and some other OPEC producers" to step up crude production "by about 1 million barrels a day."
According to the media outlet, "the rare request" came after US retail gasoline prices skyrocketed to their highest in more than three years. Earlier, Obama turned to Saudi Arabia with the same request in 2012.
Meanwhile, Kuwait's Kuna news agency reported on June 3 that energy ministers from Saudi Arabia, the United Arab Emirates, Kuwait, Algeria and Oman had held a meeting on June 2. The Gulf officials were weighing the pros and cons of the potential increase in oil output.
The statement, issued by the ministers, placed an emphasis on "the need for healthy market conditions that stimulate adequate investments in the energy sector, in order to ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world."
It cannot be excluded that the Gulf states lent a sympathetic ear to Washington's request, especially in light of Donald Trump's earlier criticism of the oil cartel: "Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!" the US president tweeted on April 20.
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!— Donald J. Trump (@realDonaldTrump) April 20, 2018
However, it appears that oil producers had started mulling over gradual increase in crude production regardless of Trump's plea.
Earlier, in 2016 OPEC and several non-cartel countries, including Russia, agreed to reduce oil output by a total of 1.8 million barrels per day in order to stabilize the petroleum market. Non-OPEC states promised to jointly cut oil output by 558,000 barrels per day; for its part Russia vowed to slash production by 300,000 bpd.
The measure proved efficient as crude prices reached three-year highs after a protracted period between 2014 and 2016 in April 2018.
Washington's withdrawal from the Iran nuclear deal sent oil prices even higher in May: Brent briefly mounted to $80 per barrel, prompting analysts to predict a further rise to $100 per barrel by 2019.
According to Bloomberg, the problem is that the OPEC+ agreement "removed more crude than originally intended from the market" due to the Venezuelan economic crisis and the country's energy industry collapse.
OPEC and non-OPEC members decided to boost oil extraction amid leaked reports about Washington's recent request, but crude prices fell about 2 percent on June 4, settling at $75.29 a barrel. As for WTI, it fell to $64.57 — its lowest since April 10.
"We are breaking key levels of support now. Once we started taking about $65.50 or so, it really started to accelerate. People are not really believing that the rally will continue," Phillip Streible, analyst at RJO Futures in Chicago, suggested, as quoted by Reuters.
The stabilization of oil and gasoline prices might play into Trump's hands ahead of the 2018 congressional elections. Otherwise his critics could have lambasted the US president for his Iran policy and attempted to score political points on Americans' discontent with rising gasoline.
Meanwhile, Russia is not at a loss either: Novak expects that the average oil price in 2018 will be $65-75 per barrel, which would correspond to the Russian Ministry of Economic Development's prognoses, which envisaged the crude price fluctuating between $60 and $65 per barrel.