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Trump’s OPEC Tweets Have Putin Preparing for Oil Talks

CommoditiesJul 11, 2018 11:59
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© Bloomberg. A worker uses machinery to handle oil pipes at the turntable on a drilling rig, operated by Rosneft PJSC, in the Samotlor oilfield near Nizhnevartovsk, Russia, on Tuesday, March 21, 2017.

(Bloomberg) -- When Russian President Vladimir Putin meets Donald Trump next week, he’ll be armed to discuss oil production following the U.S. leader’s series of tweets targeting OPEC, according to people familiar with preparations for the summit.

The Kremlin sees Trump as likely to raise the issue of adding crude supplies to the market in a bid to lower gasoline prices before the U.S. elections in November, according to one of the people. While Putin’s spokesman said last week that oil isn’t at the top of the list for the July 16 summit in Helsinki, officials are preparing extensive briefing notes for Putin, the people said, speaking on condition of anonymity.

Crude prices have jumped about 14 percent since April on supply concerns following Trump’s promised renewal of sanctions against Iran and outages at fields in Libya and Venezuela. The Organization of Petroleum Exporting Countries and its partners in production cuts, including Russia, have agreed to boost output to alleviate tightness, but concerns remain that it won’t be enough.

Russia has blamed U.S. policy -- especially in Iran -- for creating the risks of a deficit in the oil market. The Finance Ministry earlier this week called it “the decisive factor” pushing up crude prices now, echoing comments from Iran. Ali Akbar Velayati, foreign policy adviser to Iran’s supreme leader, will meet Putin and Russian Energy Minister Alexander Novak this week.

White House national security spokesman Vincent Picard said he couldn’t “comment or speculate on what they will talk about” when asked if the president planned to raise energy issues in his meeting with Putin.

While Russia says tweets don’t define the policy of the so-called OPEC+ group, Trump’s Twitter post led Energy Minister Alexander Novak and his Saudi counterpart Khalid Al-Falih last week to reaffirm an agreement reached in June to restore 1 million barrels a day of oil supply. Trump said Saudi Arabia assured him it could increase oil output by double that amount, though the White House subsequently backpedaled from that assertion.

The question is what Russia could offer Trump. Under the June agreement, Russia plans to raise output by 200,000 barrels a day. It may not be able to do much more than that. While the country doesn’t share data on spare production capacity, analysts estimate it at no more than 500,000 barrels per day for now.

Compared with Saudi Arabia, Russia’s oil exports to the U.S. are insignificant. Still, Moscow is a pivotal player in the OPEC+ decision-making process and could use that to win political points with the U.S., according to Ehsan Khoman, head of Middle East and North African research at Mitsubishi UFJ Financial Group Inc.

Trump’s OPEC Tweets Have Putin Preparing for Oil Talks
 

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