Trump’s bombast about oil energy prices does not match with fundamentals!

USA President Mr.Trump told in his speech that he has told Saudi Arabia and OPEC to increase crude oil production and reduce oil prices

President Mr.Trump told in his speech that he has told Saudi Arabia and OPEC to increase crude oil production and reduce oil prices. But this has no correlation with energy fundamentals as I have analyzed in the few points below the contradiction between his speech and actions. 

Mr. Trump has cancelled green energy and other international environmental conservation deals as his focus is to increase fossil fuel energy like oil and gas production in USA by offering drilling permits all over USA. He has again started giving permits for shell gas producers which generally produce gas by fracking which is very damaging to the fragile ecology.

Shell gas and other new oil and gas fields need oil prices to be above US$ 60/bbl for financial and economic viability. So low oil prices can’t increase oil production but lead to bankruptcy of energy companies.

Saudi Arabia has announced its intent to invest about US$ 600 bn in USA. Saudi Arabia is fully dependent on oil and gas export revenues and if oil prices decline, it won’t have enough money to meet its own budget let alone for investment in other country. So Saudi Arabia won’t be obliging USA by increasing production.

Crypto currencies and AI (Artificial Intelligence) are Trump’s favorite new projects and he wants to drive increased investments in these sectors. These are heavy energy guzzling sectors as huge energy is required for mining crypto currencies and for increasing numbers of data centers for processing huge data for AI.

Geopolitical tensions have increased in last 3 years with ongoing conflicts in Europe, Middle East and Asian regions. President Trump has officially announced his intent to destroy Iranian nuclear facilities and this may lead to dangerous war escalation in middle- east region which may only lead to oil price shocks and price escalation. 

So, whatever Mr. Trump has announced is more of political bombast without any fundamental logical basis. Oil price has strong support at US$ 68 and strong resistance at US$80. So I believe that it will continue to hover between 70-80 US$/bbl in this year and can only breakout above in case of some unexpected big event like sudden war or natural calamities.‼️