Trump Could Let Iran, Venezuela Oil Back On Market To Offset OPEC Cuts - Investment Firm

NEW YORK (Pakistan Point News / Sputnik - 07th December, 2019) US President Donald Trump could grant sanction waivers for Iranian and Venezuelan oil to counter output cuts by a Saudi-Russia led coalition of crude producers, John Kilduff, an energy hedge fund founder and expert commentator on oil, told Sputnik.

Saudi Arabia, which controls the Organization of the Petroleum Exporting Countries (OPEC), announced in Vienna on Friday that it had agreed with its key ally Russia to cut up to 2.1 million barrels per day (bpd) from the beginning of next year that will remove some 2.1 percent from global crude supply. Oil prices jumped as much as 7 percent on the week on the news. If the rally continues, it might cause problems for Trump as US fuel prices could rise ahead of his reelection bid in 2020, say analysts.

Kilduff, a founding partner of New York energy hedge fund Again Capital and an expert commentator on the political implications of oil, said relaxing sanctions on Iranian and Venezuelan would be one immediate option for the US president to bring crude prices lower.

"He could very well reopen talks with the Iranians who are quiet at the moment, and maybe even try and bring the Venezuelan crisis to a close and reopen their oil taps, to finish off what he started there," Kilduff said.

When prices of global crude benchmark Brent hit four-year highs above $86 a barrel in October last year ahead of the 2018 US midterm elections, Trump unexpectedly allowed a rash of waivers on Iranian oil exports. That caused prices to crash below $50 per barrel by Christmas that year.

Since those sanction waivers, US-Iran relations have become a lot more strained, with the Islamic republic accused of downing a US drone earlier this year and also planning a high-profile attack against Saudi oil installations.

Should Trump decide to fight high oil prices by granting sanctions waivers again, there were millions of barrels of Iranian oil stored in various origins that could be made immediately available to buyers, said Kilduff.

"If the Iranians get back into the market through some kind of waivers, that itself could be millions of unexpected barrels in additional supply," Kilduff said. "There's upward of 8 million barrels of Iranian oil in either floating storage and bonded warehouses off China, waiting to be released. It could negate to a good extent the reduced OPEC production."

Iran, an OPEC member that does not contribute to any production cuts because of the US sanctions, produced 2.192 million bpd in the third quarter, OPEC data shows. There is no credible data on how much of that oil got out to buyers due to the cat-and-mouse game played by the Islamic republic with US authorities cracking down on its exports.

Prior to the sanctions, Iran's oil production averaged 3.813 million bpd in 2017, according to OPEC data.

Venezuela's oil production and exports have also tanked because of US sanctions aimed at driving President Nicholas Maduro from office.

The South American country produced an average of 644,000 bpd in September, down from an average of 975,000 bpd in the first half of the year, OPEC figures show. Prior to sanctions in September 2018, Venezuela was pumping 1.354 million bpd.

Trump has shown from his past actions a clear dislike for high oil prices. Aside from the Iranian waivers, he put out a steady stream of negative tweets about oil and OPEC last year, to push the market down.

If oil prices spiked once more, Kilduff said he expected Trump "to take to Twitter again to chastise OPEC and the Saudis".

Sanctions and tweets aside, Trump's battle against OPEC and high oil prices might also be helped by his ongoing trade war with China and resurgent US crude production, said Kilduff.

The US-China standoff is one of the biggest negatives for oil prices, with Brent struggling to get above $70 per barrel since June due to concerns about a global recession.

US oil output has, meanwhile, hit a record high 12.9 million bpd, making the country the world's largest producer, according to government data - despite industry figures clearly showing a cutback in drilling by local energy companies.