By Barani Krishnan
Investing.com - A familiar friend has returned to give oil bears the upper hand: President Donald Trump.
Amid preparations for nuclear talks with North Korea's leader, the U.S. president found time early on Monday to tweet that oil prices were too high and OPEC should work on bringing them lower. That sent crude markets tumbling more than 3%. The plunge short-circuited oil's broad rally of the past fortnight and also left global benchmark Brent with its sharpest one-day decline in two months.
London-traded Brent was down $2.40, or 3.6%, at $64.85 per barrel by 2:46 PM ET (19:46 GMT), after peaking at $67.72 last week, its highest since November. Monday's drop was the most in a day for Brent since Dec. 27, when it lost 4.2%.
New York-traded West Texas Intermediate crude settled down $1.78, or 3.1%, at $55.48 per barrel. It has risen nearly 9% over the last two weeks, hitting a three-month high of $57.81 on Friday. The last time WTI fell as much was on Jan. 28.
Last year, Trump ran an unofficial White House campaign against pricey oil with his tweets as fears of short supply from U.S. sanctions on Iranian oil exports and production cuts by OPEC and Russia drove WTI to nearly $77 a barrel and Brent above $86.
The OPEC+ alliance decided last summer to suspend its production cuts and expand supplies to appease the president, who had appeared worried about the fragile U.S. economic recovery and the impact of high pump prices on midterm elections last November.
But right after the output cuts stopped, the president unexpectedly authorized waivers on Iranian export sanctions, fueling fears of excess supplies. As a result, both WTI and Brent lost about 40% between early October and Christmas, making Trump an unlikely friend of oil bears.
OPEC+ decided in early December to reintroduce production cuts from January, and together with U.S. sanctions on Venezuelan oil, crude prices have bounced back more than 20% so far this year. Prior to Monday's tweet, Trump had not tweeted about oil in well over two months.
"Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!" Monday's tweet read.
Some analysts expressed surprise at the impact the president had on the market, notwithstanding the fact that some investors might have been looking for an excuse to sell and lock in profits from the rally of the last fortnight.
That crude prices fell as much as they did on Trump's tweet "is absolutely silly," said Scott Shelton, energy futures broker at ICAP in Durham, N.C.
But Shelton agreed that the rally of the past two weeks was overdone. "A lot of bullish macro has been built into the market, and we are ripe for a correction, in my view. I would think that WTI could see itself back under $55, with only a bullish inventory report generating enough buying to offset it."
Liquidity was also a problem for market bulls, with many participants being away for the International Petroleum Week conference in London, he said.
Some took the president's tweet in stride, pointing to the latest forcast of Goldman Sachs for $70-$75 Brent in the near-term as proof of oil's underlying strength.
"Despite the very bullish fundamentals, you cannot underestimate the power of the tweet," Phil Flynn at The Price Futures Group brokerage in Chicago, said, acknowledging Monday's market reaction.
But he added that with the tight supply situation worsened by the sanctions on Venezuela, the only way Trump could tamp down the market was to release oil from the U.S. Strategic Petroleum Reserve -- something the president has tried to avoid. "If he thinks OPEC is going to help him out, forget about it," Flynn said.