Trump Calls Out OPEC, Says 'Oil Prices Are Artificially Very High'

President Donald Trump’s tweets are once again moving financial markets, only this time it’s oil taking a hit.

What Happened

On Friday morning, Trump tweeted that OPEC has driven oil prices “artificially very high,” a move that “will not be accepted.”

Prior to Trump’s tweet, oil prices had hit three-year highs this week on geopolitical tensions in the Middle East and news of large draw-downs in U.S. crude stockpiles.

Earlier this week, Reuters reported Saudi Arabian officials would like to see crude oil prices rise above the $80 level once again. Saudi Arabia has been planning an initial public offering for its state-owned oil producer Saudi Aramco, which is now expected to happen in early 2019.

OPEC secretary general Mohammed Barkindo responded to Trump's tweet in an interview on Friday morning.

"We do not have any price object, not as OPEC and not in this joint endeavor with non-OPEC. Price is not our objective and our objective remains restoring stability on a sustainable basis and in the interest of not only us as producers but also us as consumers," Barkindo said.

Why It’s Important

Oil prices gained momentum this week on market speculation that Saudi Arabia could push to maintain the current production cut agreement until after the Aramco offering. However, WTI crude dropped 0.8 percent to under $68/bbl on Friday after the Trump tweet and news that Russia may not be on board with the production cuts through the end of the year.

“I cannot at the moment give you a precise answer because we do not have the full idea how the market is going to perform in the forthcoming months,” Russian energy minister Alexander Novak told CNBC Friday when asked if Russia was committed to the 2018 cuts. Russia had previously volunteered to participate in the cuts.

What’s Next

OPEC’s next major meeting will come in June, where representatives will likely discuss whether or not to change the current production cut agreement. Russia and the U.S., the two largest global oil producers, are not members of OPEC and are not bound by their decision.

Despite Friday’s pull back, the United States Oil Fund LP (ETF) USO is up 13.6 percent year-to-date.

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