Oil prices dropped on Friday as investors acted in response to US President Donald Trump’s decision of leaving from a global climate agreement which may lead to further crude drilling in the US therefore adding more to the global supply glut.
Global benchmark Brent was down as much as 2.46 percent to $49.10 a barrel while US West Texas Intermediate (WTI) crude fell by 2.31 percent to $46.91 as of 09:19 GMT.
President Trump’s withdrawal is unlikely to support oil prices. It may also possibly bring about increased output from the US and tip the Organization of Petroleum Exporting Countries’ (OPEC) price securities.
As more US drilling mean greater hardship for OPEC and other major producers’ attempt to control output so as to cut the global supply glut and alleviate prices.
Trump Withdrawing from Climate Deal
President Trump announced on Thursday that he was abandoning the Paris climate pact, weakening attempts to battle global warming, causing dismay and disapproval from world leaders and heads of the industry around the globe.
Mr. Trump said in his speech that the landmark 2015 agreement imposed extremely unfair environmental principles which may weaken the US economy, harm US jobs, pressure American national supremacy and put the country at an unending inconvenience to the other countries of the world.
He promised to rise with the US citizens in opposition to what he called a ‘draconian’ global pact.
The Paris agreement was meant to unite the world community into fighting rising temperatures as one and Trump’s move is a major blow to worldwide attempts to deal with threats for the planet caused by global warming.
Former US President Barack Obama stated his regret over the pact withdrawal from which he was a part of.
Mr. Trump said that he wanted to discuss a better deal for the US and the administration as he had called upon the leader of Britain, France, Germany and Canada to personally explain his decision.
Statement from the White House said that the president reassured the leaders that America stays loyal to the trans-Atlantic agreement and to strong efforts to protect the environment.
OPEC crude output rose in May driven by gains from Libya and Nigeria who are excused from the agreement to cut production in an effort to recover oil prices.
Output in May increased from 315,000 barrels per day earlier month to 32.21 million.
Libya’s production edged up from 210,000 to 760,000 barrels a day while Nigeria rose from 100,000 to 1.7 million after oil fields in both countries continued production seeing that domestic conflict has diminished.
OPEC started the output cuts on January 1 in an attempt to ease bloated global inventories and boost oil prices.
Including Nigeria and Libya, OPEC oil output remained about 450,000 barrels a day higher than the target specified in the November 30 production deal, placing the group’s progress to only around 66 percent toward its goal compared to last month’s 90 percent.
Oil prices may remain on a downward trend later in the session as investors continue to react to reports that the Paris climate pact may cause to increase US production. Market is likely to be in a bearish position and investors may expect selling increases.