As the world reels from the shock of Donald Trump’s victory in the US Presidential Election, the Organisation of Petroleum Exporting Countries (OPEC) faces yet another spanner in the works to finalise production cuts. The 14-country cartel will have to battle increased political uncertainty in the short-term due to Trump’s controversial policy proposals, which include opening all federal land and waters to fossil fuel exploration in order to boost US oil output. UBS Group AG said that the time pressure on OPEC to take measures to support oil prices has increased now that Trump’s victory threatens a global market sell-off.
Trump’s policy positions make it more complicated for OPEC producers to resolve their differences and conclude a deal, as they could either support or weaken global oil prices. On the one hand, the President-elect’s focus on domestic energy production in the US could weaken prices by reviving shale oil production. An increasingly protectionist and inward-looking US could also weaken global economic growth and oil demand, according to Adam Ritchie of AR Oil Consulting. On the other hand, moves towards limiting carbon dioxide output are likely to be held back by Trump’s skeptical position on climate change, potentially boosting fossil fuel demand according to energy consultant Facts Global Energy (FGE). Mr Trump has also vowed to undo the US’s 2015 nuclear deal with Iran, which may result in decreased oil exports from the islamic republic and support prices.
OPEC aims to finalise the extent to which each member should reduce production after agreeing in September to a joint cut of between 32.5 million and 33 million barrels a day. Dewardic McNeal of Longview Global LLC in Washington, has urged OPEC to “act decisively and urgently” given how the Trump administration is a “huge black box for many analysts on every subject area“. OPEC will meet on 30 November 2016 in another attempt to strike a deal on output limits.