U.S. stocks opened higher on Monday after President Donald Trump announced he would be delaying higher tariffs on imported Chinese goods beyond a March 1 deadline as trade negotiations continue between the two countries. However, oil stocks dipped when Trump followed up his trade announcement with a tweet once again lashing out at Saudi Arabia and OPEC for higher oil prices.
The WTI crude oil price dropped more than 2.4 percent to $55.87 on Monday after Trump posted the following Tweet: “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!”
After hitting their highest level in more than three months on Friday and initially trading higher Monday on trade talk optimism, the bottom fell out of oil prices after Trump’s tweet.
It’s not the first time Trump has criticized OPEC. Back in December, Russia and OPEC defied Trump’s calls to continue producing high volumes of crude, opting instead to agree to cut global production by 1.2 million barrels per day to help balance the market.
Savvy Political Move
RS Energy Group analyst Derek Brower recently said attacking OPEC is a smart political strategy for Trump.
"It's a really low-cost strategy for him because if he gets oil prices down, he gets credit for it. If prices rise, he can blame OPEC," said Brower.
Oil prices hit their highest level in more than three years prior to Trump’s new sanctions on Iran imposed in November. However, oil prices dropped roughly 40 percent in the fourth quarter after the sanctions failed to curb global supply the way investors had anticipated. Oil prices once again ticked higher in recent weeks after Trump blocked crude oil shipments to and from Venezuela as part of U.S. efforts to support the overthrow of dictator Nicolas Maduro.
Saudi Arabia produced a record 11.1 million bpd in November, but cut production aggressively to just 10.2 bpd this year. Saudi Energy minister Khalid al-Falih recently said that production will drop to just 9.8 million bpd in March.
Oil investors will be watching to see how OPEC responds to Trump’s latest public plea. The United States Oil Fund LP (NYSE: USO) was down 2 percent in early trading.
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