Jun 29, 2018

What we're reading: Trump's pyrrhic OPEC outcome

Two smart pieces of commentary explore why OPEC's decision to lift output was a split decision for the White House, which openly called for higher production.

Situational awareness: "Oil prices rose Friday, holding on to more than three-year highs, supported by continuing risks to supply in Libya, Iran and North America," the Wall Street Journal reports.

1. In Bloomberg's opinion section, Harvard's Meghan O'Sullivan writes that President Trump may have overplayed his hand by taking tough stances against Iran and Venezuela at a time of tightening markets.

  • Unintended: "Trump seems to have been too confident in his ability to make foreign policy first and think about energy next. A byproduct of his 'energy dominance' approach has been to reinforce OPEC’s relevance at a time when the future of the cartel has been in question. Given Trump’s longstanding animosity toward OPEC, this result was surely unintended," she writes.

2. The Atlantic Council has a good interview with RBC Capital Markets' Helima Croft. She's more bullish on how the White House fared, calling the administration the "biggest winner" from the OPEC meeting.

  • "President Trump intervened in the OPEC decision-making in April with his first Tweet criticizing the organization, posted while they were meeting in Jeddah. He kept up the pressure and there were reports that America wanted a million barrels, and they got the number they wanted," she writes.
  • Yes, but: Croft later notes that it's not all sunny for the U.S., because logistical constraints in the Permian basin are slowing shale's growth. "This puts the White House back in a position where it is forced to ask Saudi Arabia and other Gulf allies for help. And that is why the United States is back in this position of dependence," she said.
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