Oil prices dropped slightly on Friday, reversing the week’s gains. This happened after U.S. President Donald Trump urged OPEC to reduce oil prices, claiming that the high prices were fueling the Russia-Ukraine war.
Trump’s Strategy on Oil Prices Speaking at the World Economic Forum in Davos, Trump said he would pressure Saudi Arabia and OPEC to lower oil prices. He had used similar tactics during his first term as part of his energy policies to reduce prices by applying political pressure.
Now, OPEC had previously reduced oil production by 2.2 million barrels per day to prevent prices from falling due to oversupply and low demand, especially in China. In December, OPEC extended these production cuts until April 2025, planning to gradually increase output thereafter.
Trump then reiterated his intention to push Saudi Arabia and OPEC to cut oil prices. He made this statement during his Davos speech, signaling a direct approach to influencing global oil markets and below is how oil prices were immediately affected. – UAE Murban oil fell by 2.1%, trading at $81.91 per barrel. – Brent Crude dropped by 3.1%, trading at $78.39 per barrel. – WTI Crude fell by 3.6%, trading at $74.74 per barrel.
Trump linked high oil prices to the ongoing Russia-Ukraine war. He argued that lower oil prices could cut Russia’s revenue from crude oil exports, weakening their ability to fund the war and potentially ending the conflict. He also held OPEC and Saudi Arabia partly responsible for high oil prices. He criticized their role in maintaining elevated prices, which he believed indirectly contributed to the Russia-Ukraine War.
Trump also suggested that falling oil prices should prompt the Federal Reserve to lower interest rates. He emphasized that this would reduce borrowing costs globally, benefiting economies around the world.
What You Should Know
Kenya had signed a deal in April 2023 with three Gulf state-owned oil companies. The agreement allowed Kenya to pay for oil imports on a 180-day credit basis, which was meant to reduce pressure on foreign currency reserves.
Under the agreement, Kenya buys oil at fixed prices of $90 per barrel for petrol and $88 per barrel for diesel, regardless of global price fluctuations. This means that even as global oil prices drop, Kenya is locked into higher prices.
Almost a year after signing this deal, the Kenyan Treasury admitted that it failed to ease foreign exchange pressures and instead caused economic distortions. Despite this, the government extended the deal in December 2024 without specifying an end date, leaving Kenyans unable to benefit from falling global oil prices.
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