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News // Middle East and OPEC

Analysts worry that Trump win puts pressure on Opec deal

10 November 2016 , 14:11Neftegaz.RU687

Even though their political predictions were once again proven spectacularly wrong with the surprise election of Donald Trump as the 45th U.S. president, analysts lost no time worrying that his win will upset OPEC attempt to prop up oil prices.

 

«The outcome of the U.S 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.»

Trump's vow to foster a fossil-fuel production revival in the U.S. caused one OPEC source to predict that prices will remain weak: «Oil is doomed.»

 

 Another OPEC source said if the cartel's meeting later this month to ratify its production cut deal is successful, it may have less of a positive effect than intended: «I don't think prices will go up much more than the current levels.»

Giovanni Staunovo, an analyst at UBS, expressed similar concerns: «The pressure on OPEC to come up with a deal only increases in the wake of the Trump victory: even though the oil market is rebalancing, the political uncertainty in the short term leave oil prices vulnerable to downside; that makes it more urgent for OPEC to act.»

 

Left entirely unsaid in the rush to blame Trump for a host of perceived upcoming calamities is the overwhelming consensus from many experts that the modest OPEC deal is meaningless due to the cartel producing oil in record quantities, and is doomed to failure (based on the track record of previous attempts to secure a deal; chronic in-fighting between members; and the outright refusal of key members such as Iran, Iraq, Libya, and Nigeria to play along).

 

Analysts have differing opinions on whether an inwardly-looking U.S. under Trump's rule will be good or bad for the global economy; taking a negative view is Bjarne Schieldrop, chief commodities analyst at SEB AB bank, who notes, «Global climate treaties are clearly at risk; removing restrictions on emissions actually means removing restrictions on the consumption of fossil fuels, [and] this means more gas guzzling cars and more oil demand.»

But FGE suggests that gains could be made in unexpected places: it points out that Trump is likely to treat climate change agreements «skeptically,» and moves toward limiting carbon dioxide output are «likely to slow or reverse,» potentially boosting demand for fossil fuels.

 

Crystal ball gazing aside, Trump seems to be gaining allies in unlikely places: while on one hand there is fear he may rescind the U.S. deal that removed sanctions against Iran, Saudi Arabia King Salman on Wednesday spoke to Trump by phone and confirmed his kingdom's aspiration to promote «the historical and strategic relations with the United States, and work together to bring peace and stability to the Middle East» – this despite Trump earlier this year saying he might consider halting oil purchases from the Saudis.

 

Trump reportedly thanked Salman and expressed his «keenness to develop the distinctive bilateral relations between the two friendly countries.»

Another potential ally, whose reputation as a street fighter is as strong as that of Trump's, is Russian president Vladimir Putin, who on Wednesday said his country is ready to fully restore relations with the United States.

Trump has repeatedly stated his interest in getting rid of onerous regulations that have stifled the U.S. energy industry, and his advisors are equally keen on prosecuting external forces they think will harm American interests, case in point: U.S. congressman Kevin Cramer earlier this year called for an investigation of OPEC to determine if the cartel is guilty of unfair trade practices.

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