President Donald Trump has urged Saudi Arabia to increase its oil production to combat the rising cost of fuel.
He tweeted that he had asked King Salman of Saudi Arabia to raise oil output by up to two million barrels a day.
President Trump said the move was needed due to “turmoil and dysfunction in Iran and Venezuela”.
Oil prices rose last week, partly due to US plans to re-impose sanctions on Iran, a major oil producer.
The OPEC group agreed to increase output, as did Russia, but this failed to reassure markets.
The Saudi Press Agency confirmed that President Trump and King Salman had spoken by phone, giving few details. According to the news agency, they had discussed the need to “preserve the stability of the oil market”.
However, the statement did not confirm that Saudi Arabia had agreed to the two million barrels a day figure.
Saudi Arabia is the world’s biggest exporter of oil and produced about 10 million barrels a day in May. The country is reported to have between 1.5 million and two million barrels a day of spare capacity – but experts told The Wall Street Journal it might not be keen to meet the president’s request.
A Saudi official told the WSJ: “Saudi Arabia does not really like going beyond 11 million barrels a day and has no intention of expanding its current production capacity. It is expensive.”
Donald Trump has repeatedly criticized OPEC even though US ally Saudi Arabia is a core member.
On April 20, President Trump tweeted that oil prices were “artificially very high”, saying this was “no good” and “will not be accepted!”
Iran, another OPEC member, has accused Donald Trump of trying to politicize the group and has blamed Riyadh for doing his bidding.
On June 30, Iranian Supreme Leader Ayatollah Ali Khamenei said the US was trying to drive a wedge between Iranians and their government using “economic pressure”.
He cautioned on his website: “Six US presidents before him tried this and had to give up.”
The value of Iranian currency, the rial, has tumbled since the US backed out of the Iran nuclear deal in May.
Earlier this week, thousands of traders at Tehran’s Grand Bazaar marched in protest against rising prices and the plummeting value of the rial. It was the biggest protest Tehran has seen since 2012.
Oil prices have been rising since the OPEC nations, as well as other producers including Russia, decided to restrict output last year.
Last November they agreed to extend those cuts until the end of 2018.
President Donald Trump has said that unless European allies fix what he has called “terrible flaws” in the accord by May 12, he will restore US economic sanctions on Iran.
The other nations that signed the deal – France, Germany, the UK, Russia and China – all want to keep in place the agreement, which has halted Iran’s nuclear program in return for most international sanctions being lifted.
Oil prices have dropped sharply after a meeting of oil producers in Qatar failed to agree a cap on output.
Brent crude fell 7% at one point, but then recovered slightly to stand down $1.87, or 4.3%, at $41.23 a barrel.
The meeting was attended by most members of oil producers’ group OPEC, including Saudi Arabia, but not Iran.
Saudi Arabia, the world’s biggest exporter, had been prepared to freeze output if all OPEC members had agreed.
However, Iran is continuing to increase output following the lifting of sanctions against it.
“As we’re not going to sign anything, and as we’re not part of the decision to freeze output, we ultimately decided it was not necessary to send a representative,” the Iranian government said.
After hours of talks in Qatar, energy minister Mohammed bin Saleh al-Sada said that the oil producers needed “more time”.
Mohammed bin Saleh al-Sada told reporters after the meeting: “We of course respect [Iran’s] position… The freeze could be more effective definitely if major producers, be it from OPEC members like Iran and others, as well as non-OPEC members, are included in the freeze.”
As well as the fall in Brent, the price of US crude oil fell nearly 7% before recovering some ground to stand $1.88 lower at $38.48 a barrel.
The meeting in Qatar was not formally an OPEC event, though most of the group’s members were represented.
OPEC has been slow to respond to the sharp fall in oil prices, which are still less than half the peak of $115 a barrel seen in June 2014.
Oil prices had risen in recent weeks, largely due to speculation that some major exporters would limit supply.
Oil prices soared as much as 12% on February 12 after new suggestions that OPEC nations were set to cut oil production.
According to the Wall Street Journal, the United Arab Emirates’ energy minister said that OPEC members were ready to reduce output.
Meanwhile, Venezuela’s oil minister said oil-producing nations were on a “very good path” to clinch a deal.
However, traders said sharp falls on February 11 may have triggered some bargain-hunting.
Eulogio Del Pino, the Venezuelan minister, who recently visited Russia and Saudi Arabia as part of a global tour to drum up support among both OPEC and non-OPEC producers, said “we’re on a very, very, very good path” to reducing production.
Brent crude closed up $3.30 at $33.36 a barrel in New York after falling below $30 on February 11.
After sinking to a 12-year low of $26.05 on February 11, US crude settled up 12%, or $3.23, to $29.44 a barrel – its biggest one-day rise since 2009.
Many traders were skeptical about the Journal‘s report, pointing out that Venezuela and Russia had tried in vain earlier this week to stir Saudi Arabia and other major producers into agreeing to output cuts.
However, some believe that prices would rebound sooner or later if production tightened or demand rose.
Commerzbank analysts said: “We expect declining US oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year.”
Friday’s price rises were also aided by figures from oil services company Baker Hughes, which said that US energy companies cut the number of oil rigs for the eighth consecutive week to the lowest levels since January 2010.
Drillers removed 28 oil rigs, bringing the total rig count down to 439, Baker Hughes said.
The jump in oil prices helped to boost sentiment on stock markets.
Wall Street was trading higher on February 12, with the S&P 500 rising 1.8% and the Dow Jones Industrial Average up close to 2% in late trading.
Oil prices fell again on January 25, eroding last week’s gains, as OPEC called for co-operation from oil-producing nations outside the cartel.
Brent crude fell 2.6% to $31.34 a barrel following a 10% rise on January 22, while US oil shed 95 cents to $31.24.
The slide came as the head of OPEC called for all oil-producing nations to work together.
Abdalla Salem el-Badri said both OPEC and non-OPEC oil producers needed to tackle oversupply to help prices rise.
“It is vital the market addresses the issue of the stock overhang. As you can see from previous cycles, once this overhang starts falling then prices start to rise,” he told a conference in London.
Despite the ongoing refusal of Saudi Arabia, the dominant OPEC member, to cut production, Abdalla Salem el-Badrinevertheless blamed countries outside the cartel for the huge global oil glut.
“Yes, OPEC provided some of the additional supply last year, but the majority of this has come from non-OPEC countries,” he said.
The organization accounts for almost 42% of the world’s oil production.
The OPEC secretary-general said all major producers should agree on methods to reduce stockpiles and thus help prices recover.
“The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable,” Abdullah al-Badri said.
Oil prices briefly fell to less than $28 a barrel earlier this month.
HSBC has lowered its forecast for the average price of Brent crude in 2016 from $60 to $45 a barrel, while UniCredit lowered it from $52.50 to $37 a barrel.
The prospect of OPEC members cutting production remains unlikely. Indonesia’s OPEC representative said that only one member of the cartel supported calling an emergency meeting to discuss ways of boosting oil prices.
The chairman of Saudi Aramco, the state-owned oil giant, said on January 25 that prices would ultimately rise to a moderate level as global demand increased.
The Iraqi government said on the same day that oil output reached a record high in December, producing as much as 4.13 million barrels a day.
Iran, which has the world’s fourth-biggest oil reserves, is also preparing to resume exports now that sanctions have been lifted.
A fall in the number of oil rigs in the US, one of OPEC’s biggest production rivals, could reduce output, with Goldman Sachs predicting a decline of 95,000 barrels per day this year.
Oil prices will recover to $70 a barrel by 2020, oil producers’ group OPEC has said.
Prices have fallen from more than $110 a barrel in the summer of 2014 to less than $37 a barrel now due to oversupply and slowing demand.
However, OPEC said oil prices would begin to rise next year and, longer term, would rise due to higher exploration costs.
It expects the market share of OPEC producers to shrink by 2020 as rivals prove more resilient than expected.
OPEC currently accounts for about 30% of the world’s oil production, down from 50% in the 1970s.
Part of the reason for this decline is the emergence of vast quantities of shale oil produced in the US. This has also been factor in pushing down the price of oil to 11-year lows.
Photo Getty Images
In its World Oil Outlook report, OPEC said it expected supply growth from US shale to slow dramatically in 2016, as producers struggled to cope with such a low prices.
OPEC’s strategy this year has been to allow prices to fall by maintaining production in the hope that, eventually, US shale producers will be forced out of business.
Another factor in low prices, OPEC said, was weaker economic growth, particularly in developing economies. It highlighted China, where the “economy seems to be maturing and growth is decelerating faster than previously expected”.
The group’s report also highlighted the “huge reductions” in spending on exploration and production by the industry as a whole due to low oil prices.
These cutbacks will ultimately see supply fall, it said, putting upward pressure on prices.
According to OPEC, another longer-term factor pushing prices up was higher exploration costs, as companies are forced to look harder for oil as traditional supply sources dwindle. Deep water drilling, for example, is considerably more expensive than drilling onshore.
Finally, OPEC said population and economic growth would see demand for energy rise by almost a half by 2040, increasing demand for oil.
OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
These countries have since been joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007).
Oil prices rose by almost 6% after Saudi Arabia and its allies launched air strikes on Houthi rebel targets in Yemen.
Saudi Arabia is the world’s biggest crude exporter.
The move has raised concerns that the conflict could spread in the oil-rich Middle East and possibly disrupt supplies from the region.
West Texas Intermediate crude futures, the US benchmark, rallied to about $51 a barrel before falling back.
Brent crude climbed to $59.71 a barrel, but has since dipped to $56.50.
Pressure on the oil price eased slightly as it became clear there was no immediate threat to Middle East oil shipments. However, fears remain that Iran could be drawn into the conflict.
Yemen is located along an important international shipping route for global energy producers. But the country is sliding towards civil war.
Houthi rebels receiving support from Iran have marched on the southern Yemeni port city of Aden, where Yemen’s President Abdrabbuh Mansour Hadi took refuge after he was forced him to flee the capital, Sanaa.
Saudi Arabia, supported by regional allies the United Arab Emirates, Bahrain, Qatar and Kuwait, launched airstrikes on Thursday aimed at halting the rebel advance.
Iran and Saudi Arabia are both members of the Organization of Petroleum Exporting Countries (OPEC), the group that produces about 40% of the world’s oil. Oil exports to Europe pass through the narrow Red Sea strait between the port of Aden and Djibouti.
However, the current glut in global oil stocks, built up in part thanks to US shale production and plentiful output from Russia and other producers, means there is unlikely to be an acute crisis in supply.
Oil prices have fallen further after the International Energy Agency (IEA) forecast weaker demand in 2015.
The IEA, a consultancy to 29 countries, said supply and demand would take “some time” to respond to sharp falls in oil prices.
It said it was too early to expect low oil prices to start constricting a US supply boom.
On December, Brent crude fell to below $63 a barrel, its lowest price since July 2009.
The price of Brent fell to $62.50 a barrel at one point before recovering slightly to $62.67. US crude was trading below $59 a barrel.
The IEA cut its forecast for global oil demand growth next year by 230,000 barrels per day to 900,000 barrels per day on the expectation of lower fuel consumption in Russia and other oil-exporting countries.
Photo Getty Images
Oil prices have been in steep decline since June due to slow demand growth and a US shale oil boom which has increased supply.
Prices “continued to plunge in November and into early December”, the IEA said, adding that, “it may well take some time for supply and demand to respond to the price rout”.
The root cause of the fall in prices was “a surge in non‐OPEC supply to its highest growth ever and contraction in demand growth to five‐year lows”.
It predicted that non-OPEC supply gains would add to a global glut of oil.
The US boom should push non-OPEC production to a record 1.9 million barrels per day this year, IEA said, but this figure should fall to 1.3 million barrels per day in 2015.
In Russia, the IEA said lower global oil prices combined with the effect of sanctions and a “collapsing currency” were likely to have an adverse effect on production.
Oil prices plunged after the OPEC oil producers’ cartel decided not to cut output at its meeting in Vienna.
OPEC’s secretary general Abdallah Salem el-Badri said they would not try to shore up prices by reducing production.
“There’s a price decline. That does not mean that we should really rush and do something,” he said.
Following the announcement Brent crude fell below $72 a barrel, hitting lows previously seen in August 2010.
The 12 OPEC members decided to maintain production at 30 million barrels per day as first agreed in December 2011.
“We don’t want to panic. I mean it,” said Abdallah Salem el-Badri.
“We want to see the market, how the market behaves, because the decline of the price does not reflect a fundamental change.”
Crude oil prices have fallen 30% since June on sluggish global demand and rising production from the US.
The fall in the oil price has been causing concern for several members of the oil cartel, as most require a price above $80 a barrel to balance their government budgets and many need prices to be above $100 a barrel.
“Saudi Arabia and the Gulf states can resist for a while,” said Simon Wardell, energy expert at Global Insight.
“They have significant financial assets that mean they can sustain a lower oil price. They can secure their budgets without a higher oil price.”
Saudi Arabia is the largest producer within the OPEC oil producing cartel.
Analysts suggest the strategy of maintaining output may be aimed at retaining dominance of the market in the face of increasing shale oil production in the US.
The shale boom has been one of the drivers behind the decline in the oil price.
As the oil price dips, shale becomes less economical to produce.
If oil prices are allowed to remain low for some time that could cap shale production over the longer term.
OPEC accounts for a third of the world’s oil sales.