With the global economy on a cyclical upswing, how the battle between the price and income effects on oil consumption plays out is crucial, analysts said.
One of the few factors that has limited oil prices from surging even more is USA production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia's output of around 10 million bpd. "No good and will not be accepted!".
But Trump, alongside French President Emmanuel Macron, told reporters Tuesday afternoon that it's possible a deal could be reached "fairly quickly". "What is more, demand appears robust". But prices would rise again once sales stopped and a release from the SPR would effectively be competing with USA producers, which Trump is unlikely to want to do.
A rise in geopolitical tensions has been the main driver of prices in recent times with concerns mounting over whether the Trump administration will withdraw from the 2015 nuclear deal, which he called "insane" yesterday, and return to sanctions, a decision which needs to be made by 12 May.
"OPEC and its non-OPEC partners are now receiving greater acknowledgment for market discipline, views of shale oil economics are no longer the most important price-setting factor, and demand pessimism is significantly reduced", the bank said. That's creating headaches for USA consumers who are paying 15 percent more for a gallon of gasoline than they were a year ago. According to Westbeck Chief Executive Officer Jean-Louis Le Mee, the "crunch year" for strong oil prices will actually be 2019, though, when the effects of five years of under-investment in new oil projects around the world have their full impact.
The timing of Trump's tweet was not random.More news: You can't buy the Champions League, says Kroos
More news: Former Cardinals kicker Jay Feely apologizes for gun photo
More news: Eliud Kipchoge wins London Marathon as Sir Mo Farah finishes third
Admittedly, the rise in fuel costs will eventually weigh on the disposable income of consumers and the profits of non-oil businesses. Analysts believe that although higher oil prices may improve sentiment on the stocks, it may not necessarily be reflected by the share prices immediately.
Official weekly USA fuel inventory and crude production data will be published on Wednesday by the Energy Information Administration (EIA).
As a result, the US economy would, on balance, benefit from lower oil prices.
"Increase in oil price level will have to go through many layers until it translates into more jobs for O&G service providers, which will then lead to better earnings, and then higher share prices", he said.
SINGAPORE, April 25 (Reuters) - Oil prices were stable on Wednesday, but some way off more than three-year highs reached the previous session as rising USA fuel inventories and production dragged on an otherwise bullish market.
Last week, President Trump had accused OPEC of artificially inflating oil prices.