Trump tries a bold move with Saudis on the crisis in Venezuela and the oil agreement of Russia



It is a bold move that few would try, but the president of the United States, Donald Trump, has the help of Saudi Arabia to fill any gap in the supply of oil caused by him in Venezuela, while trying to prevent the "kingdom of the desert "Get more help to raise oil prices.

Refineries on the Gulf coast of the United States squeezed by the absence of Venezuelan oil, White House officials have told them not to wait for any oil launch of the Strategic Petroleum Reserve because they are "sure" that the Saudis will increase Crude exports to the United States in the coming weeks. , energy service Platts said Thursday, citing a source with the Trump administration.

As Platts points out, what makes the US position. UU It is noteworthy that Saudi officials have not indicated plans to compensate for the deficit in the Venezuelan supply, since the OPEC cartel in which they have influence has been cutting production to boost prices.

US senators propose & # 39; NOPEC & # 39; to fight OPEC + 10

At the same time, a bipartisan group of senators from the United States has drafted a bill for the Justice Department to request OPEC members for antitrust violations if the cartel tries to formalize its oil cooperation pact with Russia. The acronym for the bill of the United States, curiously, is "NOPEC", which means "Law of cartels that do not produce and export oil".

The Wall Street Journal reported on Tuesday that the Saudis expect in particular to formalize the so-called OPEC + 10 alliance between the cartel and a group of ten oil producers led by Russia for better control of world oil prices.

5-hour chart of WTI

5-hour chart of WTI

OPEC + 10 has been successful twice in the last three years to recover oil prices from multi-year lows, and is now trading at over $ 52 per barrel, from December lows to $ 43.

But Bloomberg reported on Wednesday that Russia was struggling to meet the latest export cuts it had made under the alliance, prompting an impatient Saudi Arabia to propose a formal plan to try to improve Moscow's accession. Even before the negative reaction of the US Congress. UU On Thursday, the Russian Foreign Minister, Alexander Novak, had been reluctant to the Saudi plan.

To succeed, the Saudis offer a perfect solution to the crisis in Venezuela

In the mind of Trump, the Saudis offer a perfect solution for the Venezuelan crisis, since the Kingdom produces the same type of heavy crude loaded with sulfur as the South American country: the refiners of the United States. UU They need to mix with lighter crudes to produce diesel and other means of transportation. fuels Canada has the abundance of the so-called "sour" crude, but lacks sufficient pipelines to send more of it to the US. UU Iraq, Colombia and Mexico also have similar oil, but none can match Saudi capacity.

While it is logical that Trump trusts his most important Middle East ally to help in an energy crisis, the Saudis may feel little sympathy for a president who relies on his goodwill and shows no remorse for harming his economy, which he desperately needs. . Oil prices will be closer to $ 80 per barrel.

Says Phil Flynn, energy badyst at The Price Futures Group brokerage in Chicago:

"If there is one person who will have the courage to do this, it is Donald Trump, his hatred for the OPEC cartel forms is well known." Balancing that with Saudi Arabia's important relationship has been his problem because the interests of Saudi Arabia and OPEC are intertwined. "

A family story

For the average observer, the drama of the United States and Saudi Arabia is an all-too-familiar telenovela that repeats itself barely a year after its first screening. The difference is that the first season had Iran as the blade instead of Venezuela.

Having canceled an Obama-era nuclear agreement with Iran and applying sanctions to the Islamic Republic's oil exports, Trump had exhorted Saudi Arabia, which had managed to raise oil prices to more than $ 60 per barrel since the first round of OPEC + 10 cuts: To increase production to fill the gap left by Tehran.

At the moment when the additional Saudi barrels reached the coasts of the USA. UU., Crude oil, the world benchmark for oil, was close to $ 90 per barrel and Trump, for fear of a reaction to the high prices of the pump during midterm elections in the US. UU The result was a market crash for fear of oversupply, with record production of shale oil in the US. UU That represents a perfect storm for the Saudis.

When Riyadh contemplated cuts in production, Trump began to tweet that he should not do so, which added to the collapse of prices. The murder of Saudi citizen Jamal Khashoggi, who was also a US resident journalist, added to the strange combination, fueling the perception of a Riyadh in debt to Trump and less inclined to challenge him with production cuts if he wants to avoid reprisals from the side. of murder.

Of course, the Saudis have since reduced more barrels to the United States than any skeptic could have imagined, making Khashoggi seem almost an inconsequential factor in Riyadh-Washington relations. Since the OPEC + 10 cuts began in December, Trump also stopped tweeting about oil prices or intervening in the market, until the Venezuelan crisis arose.

There is no certainty that Riyadh will play in Trump's game this time

Leaving aside, the crisis in Caracas is quite different from the Iranian, in the sense that Trump will not issue (and can not) exemptions, since the removal of Venezuelan President Nicolás Maduro, seen globally as a dictator, is the goal general .

The question, therefore, is what do the Saudis earn by helping Trump? And would they risk increasing exports to the United States once again, just as the market has begun to take production cuts seriously?

There is also the question of how much free capacity the world's largest oil exporter has, with some reports suggesting that with the decline in production since December, the Saudis will have trouble putting more barrels into the market quickly.

Flynn of The Price Futures Group says: "Nobody really knows how this will end. Not even the president.


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