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Oil slips after Trump calls on Opec to lower prices

US President Donald Trump makes a special address remotely during the 55th annual World Economic Forum (WEF) meeting in Davos on January 23 Reuters/Yves Herman
US President Donald Trump makes a special address remotely during the 55th annual World Economic Forum (WEF) meeting in Davos on January 23
  • US president addresses WEF
  • Links high inflation to oil price
  • Trump ‘surprised’ prices still high

Oil prices were down on Friday after US President Donald Trump drew a direct link between persistently high inflation and global oil prices during video remarks before the World Economic Forum in Davos, Switzerland. 

Trump said he intends to address the problem by boosting domestic production and by asking “Saudi Arabia and Opec to bring down the cost of oil”. 

“You got to bring it down, which, frankly, I’m surprised they didn’t do before the election,” the US president said. “That didn’t show a lot of love by them not doing it. I was a little surprised by that.” 

Brent crude futures fell 50 cents to $77.95 a barrel by 00:44 GMT on Friday, Reuters reported. US West Texas Intermediate crude shed 31 cents to $74.31.

Opec+, which includes Saudi Arabia, the UAE, Kuwait and nine other countries, extended ongoing output cuts by a few months at its latest meeting in December in an effort to support prices that have remained below some members’ breakeven levels, including Saudi Arabia’s.  

In his remarks, Trump also suggested that Saudi Arabia’s and Opec’s intervention in lowering prices would “immediately” put an end to the war between Russia and Ukraine.

“They should have done it long ago,” he said. “They’re very responsible, actually, to a certain extent, for what’s taking place — millions of lives are being lost.”

Once prices fall, Trump said he will “demand that interest rates drop immediately”. 

The US Federal Reserve’s Federal Open Market Committee (FOMC) is responsible for setting the federal funds rate range – which tends to drive interest rates across the world – based on market conditions and independent of political pressure from the White House.

Speaking to Davos’ typical audience of global bankers, government ministers and CEOs, Trump also cited press reports that Saudi Crown Prince Mohammed bin Salman pledged $600 billion of US investments in the next four years during a call the two leaders held Wednesday.

“But I’ll be asking the crown prince, who’s a fantastic guy, to round it out to around $1 trillion,” Trump said Thursday.

“I think they’ll do that because we’ve been very good to them.” 

Earlier on Thursday, Saudi Arabia’s finance minister Mohammed Al-Jadaan defended the $600 billion promise made by the Crown Prince calling it “not very new” and claiming that Saudi Arabia has already invested more than $770 billion in the US economy.

“This is a combination of investments and procurement,” he told Bloomberg on the sidelines of the WEF. “We have very ambitious plans in Saudi Arabia. Saudi Vision 2030 is moving on plan and our relationships, whether it is with the US, with Europe, or China will continue to be flourishing.”

Trump won a second term in office on an 'America first' platform, calling for higher tariffs on imports and spooking markets with the threat of international trade wars. US-Saudi trade was worth $46.6 billion in 2022.

Asked if a Trump presidency concerns him, Al-Jadaan said “We are excited about the US economy. We think the next few years will actually show strength for the US economy and that will be good for the whole world.”

This week, Aramco’s chief executive Amin Nasser said he sees the oil market as healthy and expects an additional 1.3 million barrels per day of demand this year.

The state-backed oil company bought its first cargo of WTI Midland, a US crude oil grade that underpins the global Brent benchmark.

According to Fitch Ratings, Saudi Arabia needs oil to trade at over $90 a barrel to balance its budget. The International Monetary Fund has put that figure at $80.

Saudi Arabia is currently investing billions in a series of development giga-projects to diversify the economy away from oil under the banner of Saudi Vision 2030. It has increased borrowing to help finance these projects.

Al-Jadaan pushed back against suggestions that Saudi Arabia’s large spending commitments could leave it over-stretched, saying: “We know exactly what we are going to spend, where we are going to get that money from, how we are going to make sure that it helps the economy, and not crowd out the private sector.”