US President Donald Trump and Iran have exchanged sharp words over oil prices, with Trump blaming OPEC for high oil prices and Tehran accusing him of stoking volatility after he withdrew last month from a global nuclear arms deal with Iran.
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Trump sparked the latest back-and-forth when he renewed his attack on OPEC in a tweet on Wednesday that said oil prices are too high and that the cartel was "at it again".
Oil prices have risen by around 60 per cent over the past year after the Organisation of the Petroleum Exporting Countries and some non-OPEC producers, including Russia, started reducing supplies in 2017.
The cartel meets on June 22-23 in Vienna, and producers are seen as likely to raise production, perhaps before the limits are due to sunset at year-end.
Iran's OPEC governor, Hossein Kazempour Ardebili, fired back quickly at Trump's words. "You cannot place sanctions on two OPEC founder members and still blame OPEC for oil price volatility," he said in a statement to Reuters, referring to his country and Venezuela. "This is business, Mr President - we thought you knew it."
The oil supply deal is set to continue through the end of 2018, but plans for its continuation were unclear. The calculus changed after Trump announced in May that the US was pulling out of the 2015 deal that restricted Iran's nuclear program in exchange for the removal of sanctions.
The US move has put pressure on European and Asian clients to stop importing Iranian oil or doing business with the country. Saudi Arabia, Iran's rival and the largest producer in OPEC, and Russia, the world's largest producer and a party to the deal, have already increased supply. Saudi Arabia supported Trump's decision to exit the Iran nuclear agreement.
"I think the Trump tweet makes the Saudi's job of getting compromise at the OPEC meeting tougher," said Joe McMonigle, senior energy policy analyst at Hedgeye Potomac Research in Washington.
Saudi production rose to 10.03 million barrels per day in May, in line with deal quotas, according to OPEC data. Russia's production was 11.1 million bpd in the beginning of June, exceeding its quota, according to sources familiar with the matter.
The price of Brent crude peaked in May at $US80.50 a barrel, then pulled back, trading on Wednesday near $US76 at barrel, partly in anticipation that the deal may end.
"Oil prices are too high, OPEC is at it again. Not good!" Trump wrote in his post on Twitter after last raising the issue in April.
The potential for OPEC to boost production has raised concerns about the cartel's limited spare capacity, which could fall to as low as 2 million bpd. This would make it harder to respond to a supply shock, such as out of Venezuela, where output has declined to a 33-year-low due to an economic crisis.
"OPEC has the lowest spare capacity ever right now," said fund manager Pierre Andurand, in a tweeted response to Trump. "There is going to be a real issue," he wrote, predicting prices above $US150 per barrel within two years.
In the US, petrol pump prices nationwide have risen to near $US3 a gallon during the peak summer travel season, still less than the $US4 a gallon during the 2007-2009 Great Recession. Petrol demand has remained strong, rising to an estimated 9.9 million bpd as of last week, according to US Energy Department data.
Trump sent out his tweet hours after returning to Washington from a summit with North Korean leader Kim Jong Un in Singapore. It was not immediately clear what prompted his comment.
Australian Associated Press
