Oil falls as focus returns to Opec after Trump election surprise
Oil fell as the market’s focus shifted from the shock of Donald Trump’s US presidential election victory to questions about Opec’s ability to rebalance crude supply and demand.
Futures declined as much as 1.9 per cent in New York, erasing earlier gains after the International Energy Agency said prices may retreat amid “relentless global supply growth” unless the Organization of Petroleum Exporting Countries enacts significant output cuts. The dollar rose to an eightmonth high against its peers amid increased inflation expectations, putting downward pressure on commodities priced in the currency.
Traders are weighing the implications of a Republican again presiding over the nation that consumes more oil than any other — and is one of the biggest producers too. Trump has promised freedom from Opec and some of his energy policies include opening federal lands to drilling and freeing up offshore areas to development. While investors took comfort from a conciliatory acceptance speech on Wednesday, surging US crude supplies served as a reminder of the massive global glut, which the IEA said could persist through 2017.
“The IEA report showed that OPEC production has climbed to a new high, which is cause for concern,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “When we thought they were about to put their foot on the break, they were actually putting their foot on the accelerator.”
West Texas Intermediate for December delivery fell 63 cents, or 1.4 per cent, to $44.64 a barrel at 11:37 am on the New York Mercantile Exchange. Prices closed up 0.6 per cent on Wednesday, erasing an earlier 4.3 per cent slide as Trump’s pledge to unite divided political factions prompted a reversal in the knee-jerk sell-off. Aggregate trading volume on Nymex showed 1.768 million contracts changing hands, according to updated data on Thursday.
Brent for January settlement slipped 58 cents, or 1.3 per cent, to $45.78 a barrel on the London-based ICE Futures Europe exchange, trading at a 45-cent premium to January WTI. The global benchmark crude rose 0.7 per cent to $46.36 on Wednesday.
Trump has promised freedom from Opec and some of his energy policies include opening federal lands to drilling and freeing up offshore areas to development