INSUBCONTINENT EXCLUSIVE:
Donald Trump tweeted "Thank you to Saudi Arabia, but let's go lower!"
American travelers as they head into a busy Thanksgiving holiday.But the dramatic decline cuts both ways, with several energy firms big and
small seeing their stock prices fall even as President Donald Trump cheers the lowest oil prices in more than a year.On Wednesday morning,
the president tweeted:"Oil prices getting lower
Great! Like a big Tax Cut for America and the World
Thank you to Saudi Arabia, but let's go lower!""He's a piece of work," said Nancy Tengler, chief investment officer at Heartland Financial
"It's all supply, that is the issue
is producing 11.5 million barrels a day
We are largest producer in the world
There's just more supply than demand currently
If Saudi Arabia keeps pumping and exemptions to Iran stay in place, prices are going to stay low."The current surplus is largely attributed
to a miscalculation between demand and output by major producers, including Iran
A strong dollar is also weighing on oil prices because it makes oil more expensive for much of the world
Oil prices tend to fall as a result.Several companies have been shellacked by the price decline
Small- and medium-size independent oil companies that rely on fracking are seeing their profit margins erode, which is hurting stock prices
Newfield Exploration's stock price is down 39 percent this year
PDC Energy shares are off about 30 percent
Oasis Petroleum is down 14 percent, and Apache Corp
has declined about 20 percent.Benchmark Brent Crude and West Texas Intermediate both saw big price drops Tuesday, but rallied Wednesday
despite a report that crude stockpiles rose by nearly 5 million barrels last week
West Texas Intermediate was up more than 3 percent at $55.29 at 1 p.m
Benchmark Brent was up 2.2 percent at $63.94
Both are down more than 20 percent from their highs in early October.The magic number is $50 per barrel
Much below that and companies start really hurting.Oil entrepreneur Harold Hamm of Continental Resources has been one industry executive
Trump has relied on for advice.In an interview in January, Hamm said that "I'm not thinking at all that we'll see extreme prices in the
future around $80 or $90 a barrel
That's not in the interest of producers around the world
We're not trying to do that, and OPEC's not thinking that either
When you read their rationale, it's based on a healthy market."Hamm said that break-even costs for U.S
shale oil producers were as low as $35 a barrel and some as high as $45 or $50."But initially when OPEC started to flood the market, they
thought high-cost production meant $70 in a lot of these [geological] plays," he said
"What they quickly found out was that that was really wrong
They realized 'these guys could complete with us.' That's when they had to reverse their tactics."Frank Verrastro, an oil expert at the
Center for Strategic and International Studies, said he anticipates more oil price volatility until the Dec
6 meeting of the Organization of the Petroleum Exporting Countries, where he believes the cartel will cut production as it searches for a
price close to $80 a barrel.In the meantime, he said, "money managers are waiting for an event that will catalyze a change in price, whether
it is a supply disruption, a geopolitical event or news that demand is stronger than thought."Verrastro said the president has his mind on
one thing: keeping oil prices low, which is a huge boost to consumers."The president is thinking, Happy Thanksgiving
I give you lower prices," Verrastro said.U.S
giants Chevron and ExxonMobile saw their shares climb Wednesday, but both are down about 10 percent in 2018.Oil is a boom-and-bust business
The price drops when supply exceeds demand
Producers pull back and slow production as a result of the price squeeze
When demand exceeds supply, producers start drilling again and the cycle picks up again.The United States is the world's biggest oil
consumer at about 21 million barrels a day of the 100 million barrels produced daily worldwide
It is also a top oil producer, thanks to the shale oil renaissance over the past half-de-cade.Oil and gas represent about 7.6 percent of U.S
Low prices have a salutary effect across the economy, including moderating the rate of inflation
By helping to keep inflation low, low oil prices can stem the rise of interest rates, including for mortgages and auto purchases.Oil prices
dove quickly Tuesday on Trump's endorsement of strong ties to oil swing producer Saudi Arabia, the de facto OPEC leader under fire for the
October killing of journalist Jamal Khashoggi, a contributing columnist for The Washington Post.Saudi Arabia's willingness to maintain
production is crucial to keeping oil prices low and the president happy
The oil giant was contemplating a cut in production at the December OPEC and non-OPEC meeting, which could raise prices.Trump has repeatedly
tried to insert himself into key economic decisions made by others, and has been particularly incensed about interest rates and oil prices
He believes low interest rates and low oil prices will help boost the economy, though he often dismisses concerns that White House
interference in these decisions could distort markets.For months, Trump pressured OPEC to lower oil prices, even jawboning the coalition on
Twitter."Looks like OPEC is at it again," he wrote
"With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and
will not be accepted!"Trump has imposed severe economic sanctions against Iran, which limit the ability of other countries to buy Iran's oil
The move was expected to drive up oil prices, which would make it more costly for consumers and businesses, but oil prices have stayed low
in recent months.In a move that limited the impact of the Iran sanctions on oil prices, however, the White House gave temporary waivers to
eight countries that allowed them to keep buying Iranian petroleum, at least for a little while.This week, Trump's comments came as part of
a strident defense he has made regarding his relationship with Saudi Arabia, dismissing assessments from U.S
intelligence agencies that top Saudi leaders were involved in the killing of Khashoggi.Last year, Trump praised the economy's performance,
particularly the run-up of the stock market
As the market has hit turbulence, however, Trump has found other things to highlight.Energy has been one of the hardest-hit sectors in the
Standard Poor's 500-stock index, thanks largely to the decline in oil
The sector slipped 3.29 percent Tuesday, the steepest of all 11 sectors.(Except for the headline, this story has not been edited by
TheIndianSubcontinent staff and is published from a syndicated feed.)
