OPEC’s job has just be­come tougher with Trump win

Kuwait Times - - BUSINESS -

OPEC’s job of try­ing to prop up oil prices has just got much harder. With Don­ald Trump win­ning the US pres­i­den­tial elec­tion, the 14-coun­try oil-pro­duc­ing car­tel may have to bat­tle a sourer out­look for the global econ­omy and weaker de­mand for crude.

It also faces the prospect of in­creased US oil out­put - a ma­jor bug­bear for the Or­ga­ni­za­tion of the Pe­tro­leum Ex­porting Coun­tries - given Trump’s pledge to open all fed­eral land and wa­ters for fos­sil fuel ex­plo­ration. OPEC’s in­ter­nal dy­namic could change, with Trump promis­ing to tighten poli­cies on Iran just as oil com­pa­nies be­gin slowly to return to the Is­lamic Repub­lic.

“Buckle up your seat­belts for a more tur­bu­lent and un­cer­tain global econ­omy that is ahead,” Pulitzer Prize-win­ning US oil his­to­rian Daniel Yer­gin, vice-chair­man of the IHS Markit think tank, told Reuters. “The out­come of the US elec­tion adds to the chal­lenges for the oil ex­porters be­cause it will likely lead to weaker eco­nomic growth in an al­ready frag­ile global econ­omy. And that means ad­di­tional pres­sure on oil de­mand,” Yer­gin said.

Oil prices fell al­most 4 per­cent early yes­ter­day but re­cov­ered to trade up slightly at around $46 per bar­rel by 1055 GMT. OPEC will meet on Nov. 30 in an ef­fort to cur­tail out­put and re­duce the global oil glut that has seen prices more than halve since 2014.

OPEC sources said they ex­pected oil to re­main weak in the days and weeks ahead due to wor­ries about the global econ­omy and un­cer­tainty about Trump’s poli­cies for the Mid­dle East. “Oil is doomed,” one of the sources said. A sec­ond source said the OPEC meet­ing in Novem­ber might fail to have a strong im­pact on prices even if it strikes a deal to limit out­put: “I don’t think prices will go up much more than the cur­rent lev­els.”

Trump has promised to dou­ble US eco­nomic growth but also pledged pro­tec­tion­ist trade poli­cies. “This will have huge neg­a­tive im­pli­ca­tions for Asia, given how much their GDP is tied to trade with the U.S. Hence it is neg­a­tive for growth and oil de­mand, at least due to the un­cer­tainty that Trump cre­ates,” said Am­rita Sen, of the think tank En­ergy As­pects.

Trump’s en­ergy poli­cies have been limited in de­tail so far. But what he has said will be seen as sup­port­ive for the share prices of US in­de­pen­dent oil and gas pro­duc­ers as well as oil ma­jors with large ex­po­sure to the US shale in­dus­try such as Chevron, ExxonMo­bil and Shell.

“Trump has vowed to lead a fos­sil-fuel re­vival to un­der­pin job growth and has also put man-made cli­mate change de­nial at the fore­front of his en­ergy pol­icy,” JBC En­ergy an­a­lysts said in a note. Trump said he was in favour of re­mov­ing oil-sec­tor reg­u­la­tions, open­ing fed­eral land to drilling, and vowed to re­vive a ma­jor trans-Cana­dian and tran­sUS oil pipe­line project while pledg­ing to sup­port the coal in­dus­try. The stocks of oil ma­jors BP and Shell were down in line with the price of crude, while France’s To­tal un­der­per­formed peers.

Ear­lier this week, To­tal signed a deal with Iran to help it de­velop a huge gas field, be­com­ing the first Western en­ergy com­pany to ink a ma­jor deal with Tehran since the lift­ing of in­ter­na­tional sanc­tions this year. Trump has crit­i­cized the West’s nu­clear deal with Iran, adding to un­cer­tainty and frus­trat­ing Tehran’s push for for­eign in­vest­ment to re­vive its econ­omy.

An ex­ec­u­tive from an oil ma­jor ne­go­ti­at­ing with Iran said that given Tehran wanted to re­pay in­vest­ments slowly, maybe over five to 10 years, many oil firms would take a slow ap­proach in fi­nal­iz­ing deals un­til Trump’s poli­cies be­came clearer. “It is a sig­nif­i­cant amount of money that will be put at risk should sanc­tions be brought back,” the ex­ec­u­tive said. — Reuter

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.