Global oil prices rose Thursday as the Organization of the Petroleum Exporting Countries concluded a meeting in Algiers, where the group wrestled with pressure from President Trump to pump more.
Benchmark Brent crude was up slightly at $81 a barrel on London’s markets, while West Texas Intermediate was trading up at more than $72 per barrel.
Brent hit a four-year high this week at $80 per barrel. American drivers in recent months have felt the effect at the gas pump, where prices have risen to a national average of around $2.85 per gallon.
OPEC has come under attack from Trump all year, and most recently this month, for limiting production, which helped drive up oil prices.
JPMorgan Chase in a report last weekend cited geopolitical risks, including the trade war with China, North American Free Trade Agreement negotiations and the chance of “a major miscalculation from sanctions” against Iran, that could push the price of oil toward $90 a barrel.
“Sanctions seem to be biting earlier and more forcefully than originally anticipated,” said Frank A. Verrastro, an oil expert with the Center for Strategic and International Studies.
Thursday’s increase comes as a Reuters report said Saudi Arabia, OPEC’s de facto leader, will temporarily pump 500,000 barrels per day more to ease tight supplies in the wake of U.S. sanctions against Iran, which is a major supplier.
Despite that, Bob Tippee, editor of Oil & Gas Journal, said the president’s jawboning of OPEC leaders may not help much.
“I don’t think the important OPEC producers, Saudi Arabia, Kuwait, [United Arab] Emirates, want to get in open conflict with Trump,” Tippee said. “They are going to do what’s in their economic interest. And that’s what they are doing.”
In a communique released after its meeting last weekend, OPEC “expressed its satisfaction regarding the current oil market outlook, with an overall healthy balance between supply and demand.”
OPEC said in the communique its leaders “expressed its satisfaction regarding the current oil market outlook, with an overall healthy balance between supply and demand.”
Tippee said their producers see their comfort zone in the $75 to $80 range, where “producers can make money, and it doesn’t extinguish demand.”
OPEC learned the hard way when it comes to opening its spigots to flood the market.
“They have been cautious because back in 1997, it increased production just as the Asian financial collapse was happening,” Tippee said. “Demand slumped. Along came this slug of OPEC crude, and it crushed the market. It was really painful for producers.”
Ever since, the organization, which produced roughly 30 percent of the world’s daily consumption of around 100 million barrels, has been reluctant to splash the market.
Global demand is strong at more than 100 million barrels a day. Venezuela, once a key world supplier, has seen production decline dramatically in recent years. Iran sanctions have taken a bite out of production, and Libyan violence this past summer interfered with production.
On top of all that, U.S. producers, which have pushed domestic production to an all-time high of 11 million barrels a day, have slowed drilling activity after pressure from investors to spend less.
The result is a very tight sliver between worldwide supply and demand. That means any increase in demand or a decline in production in some corner of the world can send prices upward.
Sources said the supply increase by Saudi Arabia is not an official OPEC increase. Oil prices have been on a roller coaster over the past decade. They peaked in the $140s a barrel a decade ago. Prices bobbed in the range of $40 to $50-per barrel from 2015 through late 2017.
Oil prices began to rise out of the doldrums about a year ago, after self-imposed production limits by Saudi Arabia and non-OPEC producer Russia began to take effect.