The Saudis boosted oil output this month, responding to demands from clients preparing for disruptions in Iranian supplies, according to industry executives. It's unclear, though, if Riyadh plans to sustain that production, with OPEC and its allies set to meet in Vienna in early December to discuss their plans.
Trump said on Tuesday that he won't let the murder of journalist Jamal Khashoggi jeopardize US relations with the Saudis because oil prices may rise if the partnership between the two nations breaks.
In an unconventional statement headlined "America First!" Trump said he would stand by Saudi Arabia regardless of whether Crown Prince Mohammed bin Salman ordered Khashoggi's death. The kingdom's strategic importance, he argued, outweighs the "horrible crime" perpetrated against Khashoggi, a US resident who was a writer for the Washington Post and a critic of the crown prince.
"If we broke with them, I think your oil prices would go through the roof," Trump told reporters later Tuesday as he left the White House to spend Thanksgiving in Florida. He added that given the U.S. interests at stake, "It's a very simple equation for me."
That statement drew backlash from lawmakers in both parties who have criticised Khashoggi's murder and the crown prince's alleged role.
"While Saudi Arabia is a strategic ally, the behaviour of the crown prince - in multiple ways - has shown disrespect for the relationship and made him, in my view, beyond toxic," said Senator Lindsey Graham. He added, "when we lose our moral voice, we lose our strongest asset."
Neil Dutta, an economist at Renaissance Macro Research, said in a note to clients Wednesday that Trump was wrong in ascribing the benefits of a drop in oil prices to the US economy since the nation now produces more oil. Disposable income will see a lift but Dutta said he expects mining investment to cut growth in the first half.
"This represents a shift of income from oil producers to oil consumers in the global economy," he said. "For the US, I'd argue that a drop in oil prices is still a small positive, but the more relevant story these days is the shift of income between sectors of the economy."
- Bloomberg
