NEW YORK (Reuters) – Oil futures tumbled more than 3 percent on Monday in their largest daily percentage drop this year after U.S. President Donald Trump called on OPEC to ease its efforts to boost crude prices, which he said were “getting too high.”
Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. Picture taken December 7, 2018. REUTERS/Stringer
Brent crude futures fell $2.36, or 3.5 percent, to settle at $64.76 a barrel. U.S. crude ended $1.78, or 3.1 percent, lower at $55.48.
“Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Trump wrote, in the latest in a series of tweets about oil prices since April 2018.
The comments triggered a selloff that halted momentum from Friday’s session, when both benchmarks hit more than three-month highs on expectations for tightening supply and rising hopes for a U.S.-China trade deal.
“I think that tweet set a lot of downward momentum early in the day, and we haven’t recovered,” said Michael O’Donnell, senior market strategist at RJO Futures in Chicago.
Crude prices have risen by about 20 percent since the start of the year when the Organization of the Petroleum Exporting Countries and non-member producers, such as Russia, cut production to reduce a global glut.
“Trump appears to be attempting to micromanage the oil… to maintain strong enough production to keep global supplies in surplus,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a client note.
“But as far as the Saudis are concerned, today’s tweets could even embolden their efforts toward restraint.”
Saudi Arabia recently estimated its production will fall in March by more than anticipated under the supply-reduction agreement, to 9.8 million barrels per day.
In addition, U.S. sanctions on exports from Iran and Venezuela have tightened the market even as production in the United States surges.
“If you read into (Trump’s comments), I think there’s speculation there will, in fact, be another round of waivers granted to countries and companies to buy Iranian oil,” said John Kilduff, a partner at Again Capital Management, said about Trump’s tweet. “That’s also why you’re seeing the negative reaction.”
Washington surprised the market after granting waivers to eight Iranian oil buyers when the sanctions on oil imports started in November. Brent futures fell 22 percent that month and the waivers influenced OPEC’s December decision to cut supply starting in 2019.
(GRAPHIC: Trump Tweets on oil – tmsnrt.rs/2Evscq7)
Goldman Sachs analysts said “the near-term outlook for oil is modestly bullish over the next two to three months”, but added that the outlook for later in 2019 was weaker due to surging U.S. exports and an “an increasingly uncertain economic, policy and geopolitical backdrop”.
(GRAPHIC: U.S. oil production & drilling levels – tmsnrt.rs/2Vj9SWv)
Reporting by Amanda Cooper and Noah Browning in London; additional reporting by Henning Gloystein and Ron Bousso; editing by Jason Neely and Marguerita Choy