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Trump criticizes high oil price and OPEC responds

UNITED STATES (OBSERVATORY) – US President Donald Trump on Friday accused the Organization of the Petroleum Exporting Countries (OPEC) of raising oil prices “artificially” more than a year after a deal between OPEC and independent producers cut global crude stocks.

Trump’s criticism drew reactions from oil-producing nations as crude prices plummeted following its comments.

“OPEC seems to be returning the ball again,” Trump wrote in a tweet on Twitter. “With record oil everywhere, including the most heavily loaded ships at sea, oil prices are artificially high and this is not good and will not be acceptable.”

It is unclear what prompted Trump to launch the twinkle, the first mention of OPEC by the US president through social media since he took office more than a year ago.

It comes shortly after Saudi officials say they are still far from meeting their goal of reducing a three-year global supply gap. Three officials from the world’s top crude exporter told Reuters this week they would be happy if they saw oil at $ 80 or $ 100 per barrel.

Oil prices rose this week to levels not seen since late 2014. The organization is expected to curb supplies until the end of this year, possibly in 2019.

A number of Opec members responded to Trump’s tirade, saying prices were not artificially inflated.

Oil prices are high for reasons including global political tensions, referring to sanctions against Venezuela, threats to Iran’s nuclear deal, strikes on Syria and the use of force in the North Korean dossier, delegates attending the meeting of the OPEC watchdog and independent producers in the Saudi city of Jeddah said.

OPEC Secretary General Mohamed Barkindo said the agreement between OPEC and outside producers on output cuts had prevented the collapse of world oil prices, which are now “on track to restore stability on a sustainable basis in the interest of producers, consumers and the global economy.”

“We do not have any target price in Opec or in agreement with non-OPEC producers … price is not our goal,” he said. Our goal is to restore stability … on a sustainable basis.”

The group is due to meet in June to decide on the next steps after cutting output since January 2017 along with other producers, including Russia.

Trump did not elaborate on what kind of action his administration might take with regard to oil or OPEC, and White House representatives did not immediately respond to a request for comment.

OPEC output in March fell to an 11-month low, according to a Reuters survey. The organization has targeted stocks to an average of five years in the 35 industrialized countries of the Organization for Economic Co-operation and Development (OECD) as a benchmark for the agreement’s success. By mid-April, they were 2.85 billion barrels, up 43 million barrels over the five-year average. A year ago, stocks were at 268 million barrels above this average.

US benchmark Brent crude and WTI crude hit their highest level since November 2014 earlier this week at $ 74.75 and $ 69.56 a barrel, respectively.

Brent crude was $ 74.06 a barrel, up 28 cents, while the WTI increased 9 cents to $ 68.38 a barrel.

Aside from OPEC’s supply management, crude prices also received support from expectations that the United States would impose sanctions on Iran, a member of the group. Sanctions against Venezuela have expanded after the presidential election there next month.

Standard Chartered Bank said in a note this week that “the first major geopolitical issue is the end of the current suspension of the United States for important sanctions imposed on Iran.”

The United States can only legitimately influence oil by withdrawing from its strategic reserve, which it has done from time to time.

The current year’s budget includes about 100 million barrels of crude oil, about 15 percent of the reserves, while crude production in the United States recently hit a record high of more than 10 million bpd.