More than a week after the U.S. announced that it was ending all sanction waivers for Iranian oil customers, President Donald Trump’s policy toward Iran is still the key wild card in the oil market.
That’s the opinion of Bob Dudley, the chief executive of UK oil supermajor BP, who doesn’t rule out that the U.S. could grant some waivers at the eleventh hour.
Depending on whether or not President Trump were to do that, oil prices could go down or up, according to BP’s top manager, who sat down with CNBC’s Brian Sullivan for an interview this week.
“Now the U.S. is saying they’re going to … take away those waivers again, and the oil price is clearly drifting up because of that, because of Venezuela, Libya’s got issues, so it doesn’t surprise me right now,” Dudley told CNBC, commenting on this year’s oil price rally after the 40-percent plunge in Q4 2018.
“I think the key — the wild card key — is will the U.S. at the last minute give some more waivers or not?” Dudley said.
There has been market chatter that despite the “maximum pressure” campaign against Iran, the U.S. could extend some sanction waivers as the Trump Administration would be seeking not to run up oil (and gasoline) prices too high—an issue with every American president, and a key issue for the current president.
According to an exclusive report by Reuters, hawkish national security advisors convinced President Trump that ending all waivers for Iranian oil buyers would not result in a spike in oil prices and the time had come to exert that “maximum pressure” and cut off Iran’s oil sales, three sources familiar with the debate within the U.S. Administration said.
The Administration appears convinced that Saudi Arabia and the United Arab Emirates (UAE) will step in the fill the gap after Iranian oil barrels come off the market. While analysts are trying to assess how low Iran’s exports could drop, the Saudis are not rushing to ramp up production before seeing actual barrels off the market.
Last week, when the U.S. announced the end of sanction waivers, President Trump tweeted, “Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil.”
“We have had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply,” U.S. Secretary of State Mike Pompeo said, announcing the end of the waivers.
Saudi Arabia, however, issued a measured response to the end of the waivers, vowing to work toward “market stability”, but stopping short of announcing any immediate production increase, as it did last year when it ramped up oil production ahead of the U.S. sanctions waivers decision, only to see exemptions for eight Iranian buyers, an oversupplied market, and crashing oil prices.
“In the next few weeks, the Kingdom will be consulting closely with other producing countries and key oil consuming nations to ensure a well-balanced and stable oil market, for the benefits of producers and consumers as well as the stability of the world economy,” Saudi Energy Minister Khalid Al-Falih said in a statement on the day in which the U.S. announced the end of all waivers.
After rallying to six-month highs early last week, oil prices plunged by more than 3 percent on Friday, after President Trump said “The gasoline prices are coming down. I called up OPEC. I said, ‘You got to bring them down. You got to bring them down.’ And gasoline is coming down.”
While neither Saudi Arabia nor anyone else at OPEC appears to have spoken to the U.S. president, the U.S. national average gas price actually set a new high for the year at $2.88 this Monday.
This average is nearly 20 cents more than a month ago and 63 cents more expensive than at the beginning of the year, AAA said.
“Compared to the beginning of this year, motorists have definitely felt an increasing squeeze on their wallets at the pump,” AAA spokesperson Jeanette Casselano said.
“With 17 states within a dime of or already at $3/gal or more, Americans can expect the national average to likely surpass 2018’s high of $2.97 set during Memorial Day weekend,” Casselano added.