The handwriting has been on the wall ever since U.S. President Donald Trump pulled out of the multinational nuclear agreement with Iran, but now it’s been confirmed with words out of Trump’s own mouth.
The president began complaining about high oil prices in mid-April, blaming Organization of the Petroleum Exporting Countries (OPEC) for the sharp increase in crude prices. Imposing new sanctions on Iran effectively removes hundreds of thousands of barrels a day from global markets and that would have pushed prices even higher.
In early May, Treasury Secretary Steven Mnuchin said that the United States had talked to other countries that might be ready to increase supply to make up for the loss of Iranian barrels and the continuing loss of Venezuelan barrels.
On Sunday, this is how the president responded to a question from Fox News regarding manipulation of the oil market:
100%, OPEC is, and they better stop it, because we are protecting those countries, many of those countries. OPEC is manipulating, and you know they allowed less than we thought last week, they have to put out another 2 million barrels in my opinion, because we don’t want that happening. Don’t forget the one negative to the Iran deal is that you lose a lot of oil, and they got to make up for it. And who is their big enemy? Iran. OK. You think of it. Iran is their big enemy, so they are going to have to do it. And I have a very good relationship with the king and with the crown prince of Saudi Arabia and with the others around and they are going to have to put out more oil.
Picking through the word salad, here’s the money quote: “Iran is their [Saudi Arabia’s] big enemy, so they [the Saudis] are going to have to do it.” The Saudis “have to do it” because they promised months ago that they would lift production but that they would have to wait until the June OPEC meeting in order to save a little face.
Russia began increasing production in June, pumping more than 11 million barrels a day, the most since April 2017. At the meeting of OPEC partners following the June meeting, Russia agreed to add 200,000 barrels a day to its production in the second half of the year.
Saudi Arabian production in June totaled around 10.7 million barrels a day, close to record production for the country. And that total could still go higher if estimates of Saudi spare capacity are correct.
U.S. sanctions against Iran may be returning because the Islamic Republic, according to the Trump administration, got too good a deal from the Obama administration and the other countries that negotiated the joint deal.
For Saudi Arabia, though, new sanctions weaken Iran, weaponizing oil in the battle for primacy that the Iranians and Saudis have been fighting for decades.