After revisions of certain Trump policies after his victory, will Donald Trump stick to his pledge to move oil into an era of deregulation? If so, what will that mean for the price of oil, and how might the OPEC nations react?
What a Trump presidency could mean for oil
With the appointment of global warming sceptic Myron Ebell to head his EPA transition team, it seems likely that president-elect Donald Trump will usher in a hugely deregulated era for oil and gas. Trump could push the limits when it comes to getting at fossil fuel resources, including drilling in national parks and a promised withdrawal from Obama’s legacy achievement – the Paris Climate Accord.
It’s a huge revolution in energy policy, with the EPA set to become climate sceptic and conduct a bonfire of the regulations, including the ‘endangerment finding’ that shows carbon emissions are a threat to public health. For the next four years, it seems, there will be no executive action on climate change. Trump also looks set to appoint Forrest Lucas, the founder of Lucas Oil, as Secretary of the Interior. This is the post with direct responsibility for public land and the path now looks open for major pipelines. The Dakota Access pipeline will almost certainly now be given the go ahead, despite environmental concerns.
Daily Oil price chart (IG.com)
OPEC Over-producing
The US rig count is rising steadily, and OPEC is already over producing, making cutting back to the 32.5-33.0 mb/d range increasingly unlikely. With this level of relentless global supply growth in the oil industry, prices look set to fall to the $40 a barrel mark. They’ve already flatlined again on the US stock exchange as hopes of OPEC honouring the September agreement to cut back production in November wane. OPEC will meet on the 30th November to try and broker an agreement on production levels and implement mb/d levels agreed in early autumn.
USD and Equities benefit from Trump – but Oil?
Trump’s surprise victory in the presidential election has boosted stocks and the dollar, but commodities have taken a hit. Pre-election, gold prices were predicted to break all records, but have slumped on the expectations of rising inflation. The dollar index .DXY has just hit an 11-month peak, driven by an aggressive bond sell-off that pushed Treasury yields to an 11 month high. But where a strong dollar would usually push oil lower, analysts say the correlation between the two is locked together – at least for now.
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