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Wednesday, 23 November 16
MARKET INSIGHT - CHRISTOPHER THOMAS WHITTY
IntermodalThe Organization of the Petroleum Exporting Countries (OPEC) is due to finalize a reduction in total production at its next scheduled meeting in Vienna on 30th of November. There has been however a lot of skepticism over  whether OPEC will actually come to an agreement this time around seeing as a number of prior meetings have already proven to be unfruitful.

The 14-member group wants to limit output to around 32.5 million barrels per day (bpd) , compared with current levels closer to 34 million bpd,  in an attempt to revive prices which have decreased  ~42  percent over the last two years.

Of course, the main concern here is that the Saudis will have to shoulder the largest share of the cuts if that deal goes ahead and expects from other major oil producers within OPEC to actually commit to strict limitations on output. However, Saudi  Arabia appears to once again be confident that a deal can be reached in its next  ministerial meeting,  which will be held on November 30th.

Non-OPEC producer Russia  is supportive of this and several OPEC producers having signaled their willingness to  reach a mutually acceptable decision. It looks like Iran is still lukewarm, and Iraq maintains that it should be exempt from a deal because of its fight with Islamic State militants.

There’s now a new consideration for the OPEC producers, which is of course Trump’s victory in the U.S. presidential election. The president-elect has targeted OPEC frequently during his campaign, accusing it of holding the U.S. hostage and threatening to block all imports from OPEC members like Saudi  Arabia.

Donald Trump  commented in March of this year that his “number-one priority is to dismantle the disastrous deal with Iran” and has threatened during the presidential campaign to rip up the deal Iran reached with international negotiators last year to limit its nuclear program in exchange for sanctions relief. Although Trump is unlikely to significantly change it without  European  cooperation,  his rhetoric could potentially slow investment going into Iran, a large OPEC oil producer.

Dollar-denominated crude oil prices have been under pressure since Trump’s win U.S. crude oil futures fell as much as 4 percent immediately following Trump’s surprise win to a two-month low near $43 a barrel.

In any case however, Trump will probably not be able to make good on his energy in dependence promise anytime soon, if at all. The U.S. produces almost 4.5m barrels a day from shale and a little more of conventional oil. It still imports more than 7m barrels a day. A president’s power to  sway the market, especially one as complex and interconnected  as oil, is relatively limited. 


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