Sopuruchi Onwuka
The new economic and trade policies of President Donald Trump of the United States appear to establish as a third major factor in the global oil price dashboards as threats of crippling sanctions on Russian, Venezuelan and Iranian supplies upsets predictions and send prices rising.
From a different window, the trade sanctions pledged by Trump is also signaling new opportunity for members of the Organization of Petroleum Exporting Countries (OPEC) and its allies to pump more oil into the market to ease possible supply stricture.
Analysts reported weekend that oil prices are set to post a third weekly gain on the back of Trump hindering supply from Iran and Venezuela, adding that the American economic policies are also threatening to damage demand in the long-term.
With his belligerent trade policies, President Trump appears to control the direction of demand, supplies and prices in the global petroleum exchanges as analysts take a wider view of the policy signals emerging from the White House.
The Oracle Today reports that President Trump has in his second shot at the White House administration introduced tough economic measures that tend to dismantle generous financial aids and concessional trade opportunities with the world’s strongest economic powerhouse.
Whereas most of the new trade policies tend to protect the American market from global exporters targeting the most influential currency that governs international trade, the Trump administration also appears to weaponize the American trade relations and economic weight to persuade and punish diplomatic adversaries.
In the petroleum market where the United States sits as biggest supplier of both liquids and natural gas, the Trump administration’s trade policies and sanctions also reset calculations; pushing, producers, traders and analysts to align with potential impact of Trump’s decisions in reaching supply and price decisions.
For instance, the eight OPEC+ countries that volunteered to temporarily withhold output of 2.2 million barrels of oil per day (mbd) from the alliance’s total market supply are now working to rapidly return the volumes to the market following possibility of secondary sanctions on Russian, Venezuelan and Iranian supplies.
Trump is angry over Russia’s cold response to his mediation in the ongoing Ukrainian war. He is also upset with Iran over the Islamist nation’s disruptive influence in fueling conflicts in the Middle East, a situation that undermines international maritime flow through the Persian Gulf.
The Venezuelan regime is one of the ancient enemies of the US democracy, a situation that has led to withdrawal of world’s biggest oil corporations from the country and left the southern neighbor suffering investment drought and low market returns.
In view of the three major producers currently under the wrath of President Trump, OPEC+ giants which sacrificed market opportunities to hold up prices are now making gradual return of their 2.2 million b/d voluntary cuts.
The group unexpectedly agreed to expedite the unwinding of production cuts, boosting output in May by 411,000 b/d, equivalent to three monthly increases.
Thus the combined effect of Donald Trump’s import tariffs and OPEC+’s inopportune decision to speed up the unwinding of production cuts have wiped off $10 per barrel from global oil prices, with ICE Brent falling below $65 per barrel for the first time since August 2021.
According to industry analysts surveyed by The Oracle Today, one could assume that US tariffs are the defining factor for the price change.