As if OPEC had an easy job to do in trying to get its own 14 members on the same page about its policies, another major unknown entered the global oil supply equation – potentially making the cartel’s short-term decisions irrelevant -- after Donald Trump won the U.S. presidential election.
The surprise Trump victory and his still unclear stances on many issues -including the Middle East and protectionist policies - are currently leaving the oil observers guessing what a Trump presidency would mean for the crude oil prices and for OPEC’s policies and relevance as a factor in the global oil supply and prices.
Even if in three weeks’ time OPEC manages to clinch a deal on limiting production, oil prices will not “go up much more than the current levels,” an OPEC source told Reuters on Wednesday.
So OPEC’s possible deal might not be able to prop crude prices up, at least not as much as the cartel had initially hoped for when it (surprisingly) agreed in late September to work toward an agreement to ‘stabilize’ the oil market.
OPEC also has another major Trump-related factor to consider in its efforts to reach a deal: the president-elect’s promise to open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing, and open shale energy deposits. If Trump stays true to his plans and the U.S. were to really boost its oil production, any OPEC deals may become irrelevant and will put further pressure on OPEC economies whose heavily-oil-dependent budgets are strained even now with the persisting low crude oil prices.
Then there is Trump’s criticism toward the nuclear deal the western nations had struck with Iran, just at the moment in which oil majors started to return investing in the Middle East nation and OPEC heavyweight.
The greater uncertainty for the oil market with a Trump win could further make crude prices more volatile and urge OPEC to pull off a deal on a production curb/freeze at the end of November in its bid to not only stabilize but also lift prices. The questions are, first, how motivated OPEC would be to clinch a deal, and second, would it matter at all.
By Tsvetana Paraskova for Oilprice.com
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