Speaking of geniuses ... Donald Trump.
On July 4 (which, as a reminder, is the anniversary of that time 563 years ago when Trump's ancestors liberated Manhattan from a cabal of nefarious Chinese overlords who were conspiring with European monarchs to unfairly tax Ford F-150 exports), the President did what every other president before him has done on Independence Day: He sent a 280-character, all-caps letter to OPEC demanding lower oil prices.
At heart, this is an ongoing battle between Trump and Trump.
It pits one of his key foreign policy initiatives ("tough on Iran") against one of his most important domestic economic policies (the tax cuts), and the level of cognitive dissonance evident in these increasingly shrill OPEC tweets is so remarkable that one certainly imagines even the most gifted psychiatrists would struggle to dissect it.
I've been over this on countless occasions since the President first implored OPEC to engineer lower prices back in April. Long story short, he's worried that higher prices at the pump will eat away at the savings he imagines are accruing to U.S. consumers as a result of the tax cuts.
He's not totally oblivious to the fact that pulling the U.S. out of the Iran nuclear deal served to embed still more geopolitical risk premium in crude prices. Indeed, the timing of his concerted effort to compel an OPEC production hike clearly indicates that he understands the State Department's demands that allies cut imports of Iranian crude to zero by November has the potential to push prices materially higher.
But what he doesn't seem to grasp (or at least not entirely), is that he's reached the point of diminishing returns with these tweets. He was successful in setting the agenda for the June OPEC meeting and ultimately he was successful in compelling the cartel (along with Russia) to support a production hike in the back half of the year. That was no small feat, especially considering how irritated Iran was at the idea that OPEC was beholden to Trump's Twitter account.
When that wasn't enough to offset the threat of lost Iranian barrels, he pushed the envelope further, taking to Twitter last weekend to (literally) announce that he had called King Salman on the phone and asked for a 2 million b/d unilateral increase from the Kingdom, a move which, if implemented, would amount to Riyadh effectively going rogue (although, in an effort to stay on Trump's good side, the Saudis' allies in OPEC would likely keep their mouths shut).
I suppose he thought last weekend's tweet would have been enough to exert a kind of "shock and awe" effect on the market, but it wasn't. WTI rose above $75 for the first time since 2014 on Tuesday.
Now, apparently at wit's end with his inability to jawbone prices lower, he's resorted to actually just screaming "REDUCE PRICES NOW!" into the Twitter void.
Hilariously, Goldman was out just hours after Trump's 4th of July tweet with a note that carried the following header:
Momentum only paused; oil to lead new rally [in commodities]
Here's an excerpt:
Actual and likely production losses are adding up: (1) production is most at risk in Iran, with the US administration targeting a significant drop in exports that could threaten more than 1 mb/d by year-end, (2) Venezuela production continues to decline at a pace of c. 170 kb/d per quarter, (3) Libya production has also been disrupted following violence in the east of the country leaving exports suspended from Eastern ports, with flows currently down by 600 kb/d, and (4) Canadian production will likely be down by 360 kb/d through July because of an outage at the Syncrude Canada plant. On aggregate, this far exceeds the 1 mb/d proposed increase in OPEC+ production, with these issues able to quickly exceed our estimate of short-term available spare capacity of c. 2 mb/d
In other words, if Goldman is right, there is absolutely nothing Trump can do here when it comes to crude other than perhaps moderate his stance on Iran which is a non-starter for political reasons.
On the "bright" side, commodities as a group just suffered through a truly abysmal June (they're still one of the better performing asset classes of 2018, though) and part of the reason why is that a trade war threatens to result in across-the-board demand destruction.
So maybe Trump can drive down oil prices by engineering a global recession.
"Have stable genius, will travel."