President Donald Trump warned OPEC about its "artificially very high" oil prices Friday, saying they are "no good and will not be accepted!"
His warning came in an early morning post to Twitter.
Trump's rebuke of the Organization of Petroleum Exporting Countries came after Saudi Energy Minister Khaled al-Faleh said the global market has the capacity to absorb higher oil prices, after crude hit the highest level in more than three years.
"I have not seen any impact on demand with current prices. We have seen prices significantly higher in the past — twice as much as where we are today," Faleh told reporters ahead of an oil producers' meeting in Jeddah, Saudi Arabia.
"Energy intensity as you know has declined significantly ... this reduced energy intensity and higher productivity globally of energy input leads me to think that there is the capacity to absorb higher prices," Faleh said.
Faleh insisted OPEC does not have a price target for oil.
"We never have a price target ... Prices are determined by the market," said Faleh who warned against the danger of price fluctuations, saying that "volatility is our enemy."
Because of OPEC's efforts to curb supply in a successful bid to revive oil prices, there’s no longer a global glut of oil.
Since January 2017, OPEC and other nations led by Russia have been slashing supply. OPEC’s compliance with the agreement reached a record 164 percent last month, and non-OPEC adherence gained to 85 percent, according to Bloomberg calculations. The partners have been meeting in Jeddah, Saudi Arabia, this week to discuss furthering their cooperation after the deal expires at the end of this year.
The amount of crude oil in floating storage globally has declined to 40.7 million barrels as of April 13, from 97.2 million barrels at the end of 2016 -- a 58 percent drop -- according to data from Vortexa Ltd. In addition, the curve for Brent crude has moved to a market condition called backwardation -- when near-term contracts are more expensive than those at a later date -- indicating that there’s not an oversupply.
Oil inventories in developed nations are just 30 million barrels above their five-year average, the measure that OPEC is using to gauge whether markets are balanced, the Paris-based International Energy Agency said in its latest market report this month. That’s down from more than 300 million barrels when the group started its cuts.
In recent weeks oil analysts have pointed to the fact that the diminished glut has reduced a buffer for the market, meaning that any geopolitical events -- such as the renewal of U.S. sanctions on Iran -- would have a more dramatic effect on oil prices. Trump has until May 12 to determine whether to re-impose those measures.
Material from Reuters, Bloomberg, and AFP were used in this report.
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