Bolton was a strong proponent of the Trump administration’s “maximum pressure” campaign against Iran. That campaign was built on tough sanctions that caused Iran’s oil exports to plunge.
US oil tumbled as much as 2.2% to $57.30 a barrel immediately after Trump tweeted out the firing of Bolton. Crude bounced off those lows and was recently trading around $57.75 a barrel.
“This is a knee-jerk reaction given that Bolton has been so adversarial with Iran,” said Matt Smith, director of commodity strategy at ClipperData. “With his removal, there is an expectation there won’t be as much vehemence in the tit-for-tat with Iran.”
Trump did not mention Iran in his tweet announcing Bolton’s firing. “I disagreed strongly with many of his suggestions, as did others in the Administration,” said on Twitter.
Bolton had been scheduled to deliver a briefing along with Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin in the White House later on Tuesday.
Iran’s oil exports have plunged by about 2 million barrels per day since the summer of 2018, according to ClipperData.
The sudden nature of Tuesday’s drop in oil prices likely reflects the influence of trading driven by computer algorithms.
“Algo trading is more connected to Trump’s Twitter account than actual market fundamentals,” said Smith.
The US Energy Information Administration dimmed its outlook for oil consumption on Tuesday due to concerns about the economy. The agency now expects global oil demand will increase by 900,000 barrels per day this year, potentially marking the weakest growth since at least 2011.