US President Donald Trump has promised to impose “very substantial tariffs” on imported oil, unless Saudi Arabia and Russia reach a deal to push crude prices up, just as oil fell sharply following last week’s rally.
Both Brent and WTI crude futures dived over 9 per cent at the Asian session opening, before bouncing back to around $32.6 and $26.6 a barrel respectively. The drop comes after the Organization of the Petroleum Exporting Countries (OPEC) and non-member partners abruptly delayed their emergency meeting until Thursday, apparently due to standing disagreements between Saudi Arabia and Russia.
Crude soared last week following Trump’s announcement of an imminent OPEC+ deal to cut global oil production by 10 or even 15 million barrels.
However, Russian President Vladimir Putin’s statement that he expects all oil producers to cooperate on an equal basis had cast doubt on the prospects of a deal. At the same time, he casually noted that Saudi Arabia’s withdrawal from the agreement was apparently meant to get rid of US shale producers.
Indicating no willingness to participate in a joint effort to stabilize the market by cutting US oil production, Trump offered another verbal intervention on Sunday night, threatening to impose “very substantial tariffs” on oil imports to the US if the crude price stays the way it is.
The so-called ‘Shale Revolution’ in the US in recent years has deprived the Saudis of a huge chunk of the American oil market. After failing to find common ground with Russia early this year on how to respond to the coronavirus pandemic, Saudi Arabia began pumping oil at such an intense rate that prices saw their sharpest drop since the Gulf War in 1991.
