President Donald Trump’s weekend of oil diplomacy offered mixed messages on supply, and conflicting responses from analysts who predicted a short-term price drop but said a rebound was due in the long run.
Crude was little changed in New York at 6:54 a.m., after earlier losing as much as 2.2 percent. A Trump tweet on the weekend suggested Saudi Arabia had agreed to pump 2 million more barrels a day. But follow-up statements from the White House and the Saudi Press Agency were more ambiguous. They both said the two sides talked, but neither cited a specific target.
In the short run, even the hint of a Saudi boost will drop prices, said Phil Flynn, a senior market analyst at Price Futures Group Inc. But the underlying dynamic of a market where demand increasingly threatens to overtake supplies could push prices back up longer term, he said.
“Demand for oil will start to go back up again, and the market will quickly absorb those barrels,” Flynn said by phone. “Then you’ll be in a situation where you’ve essentially removed most of the spare production left in the globe.”
Brent crude, the global benchmark, dropped 67 cents to $78.77 a barrel.
Last week, hedge funds cut bets on falling WTI crude prices by 60 percent, the most in data going back to 2006. The shutdown of an oil-sands upgrader in Canada, tensions in Libya, Venezuela’s economic collapse and a U.S. call for allies to stop buying from Iran have all taken a toll on the global crude market.
A tighter inventory picture in the U.S. has also kept crude prices elevated. Stockpiles tumbled the most since September 2016 last week, production increases paused and the oil rig count has edged lower.
Trump’s administration in early May said that it would renew U.S. sanctions on Iran and has sought to reduce other foreign buyers’ purchases of Iranian crude.
Trump’s tweet “doesn’t change the dynamic,” said Andy Lipow, the president of Lipow Oil Associates LLC in Houston, in a telephone interview. “The market perception is that supplies are tight and will get tighter with the loss of Iranian oil. It may not be until we see Brent in excess of $80 that we actually see the Saudis react.”