Dissecting Impact on Global Oil Trade in Trump Era

  • Post author:

With Donald Trump getting elected as the 45th US president, OPEC (Organization of Petroleum Exporting Countries) might have to work harder to prop up crude oil prices. As Trump vouched during his election campaign to unlock all federal land and waters for exploration of fossil fuels and to increase U.S. oil output, OPEC nations fear a reduced demand for crude and weaker outlook for global oil trade.  Trump also vowed to block all oil imports from Saudi Arabia and tighten the trade policies with Iran. Trump has frequently criticized West’s nuclear deal with Iran, an agreement which has helped Tehran to boost their crude oil exports significantly this year. Iran expects Trump Administration to stay committed with the nuclear deal, but there is a possibility that he might revoke the nuclear deal with Iran which he has ridiculed strongly. If this happens, there is a possibility of crude oil prices to rise.

Daniel Yergin, who is the currently the vice-chairman of HIS Markit think tank and is a Pulitzer Prize-winning oil historian has quoted that global economy could be more uncertain and turbulent in Trump era. He said it would likely result in weaker economic growth which will in turn reduce global demand for oil. Oil prices dropped almost 4% to $43 a barrel, early on Tuesday Nov 8th after the election results were announced with Trump chosen as the next US president. Due to excess supplies, oil prices have fallen below half their price levels compared to 2014.OPEC members have planned to meet on Nov 30th to discuss about limiting crude production in an attempt to minimize the global oil glut which has resulted in recent drop of oil prices.

Trump has pledged during his campaign to double the economic growth in US and vouched for protectionist trade policies which have caused worries among the OPEC nations about reduced demand for crude oil from US.  Still there is lot of uncertainty prevailing about what sort of trade policies Trump might pursue with the Middle East. Trump was in favour of removing the regulations against oil sector and opening up all federal land for drilling in order to uncover new oil reserves. The US independent oil and gas producers as well as major oil manufacturers like Exxon Mobil and Chevron which are tied to the U.S shale industry have witnessed a huge surge in their share prices. US economy has gained significantly in recent years through their shale oil production in form of WTI crude oil.

Trump’s plans to minimize US reliance on OPEC oil and to gain energy independence have caused worries to Saudi Arabia which is the leading OPEC exporter of oil. Trump also emphasized during his campaign that for US to continue imports of Brent crude oil, Saudi Arabia should be committed in fighting against ISIS terrorists in Syria and Iraq. 

As quoted by aomarkets.com, Saudi Arabian Energy Minister Khalid-al-Falih mentioned during his speech‘… President-elect Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trading any product is not healthy.”He also added thatthe US continues to be a very important part of a global industry that is interconnected that is dealing with a fungible commodity which is crude oil. So having equalization through free trade is very healthy for oil”. He also mentioned that US benefits a lot from global free trade than other countries and adding energy will be lifeblood of global economy. It’s worth to be noted Saudi Arabia is the major exporter of crude oil with 33% of OPEC’s oil exports to US coming from them. As of August 2016, United States has imported more than 3.5 million barrels of oil per day from OPEC.

Trump also seems to be very much interested in having a friendly relationship with Russia which is also a major producer of crude oil. Vladimir Putin was one of the first few global leaders whom he spoke with after his success in the US election. So there is a possibility for US to increase oil imports from Russia and cut down the imports from OPEC countries. Since crude oil is traded in terms of dollar, the rise in USD will have downward pressure on oil prices. Also with ongoing talks about Federal interest rate hikes during December, there is a greater possibility for dollar value to grow much stronger which is a very bad news for oil markets since it may push the oil prices further down.

Continue ReadingDissecting Impact on Global Oil Trade in Trump Era

Thanks Giving Day: Crude Oil Futures drop more than 10%. Big Trouble Ahead?

  • Post author:

This is abnormal! Crude Oil drops more than 10% when everyone is complacent and on holiday mode.  Stock Market keeps going up but Treasury Yield keep dropping. Next week will be a very good lesson for all the retail investors!

Crude Oil Nov 29-2014 Futures Nov29-2014

  • Retail investors have NO chance to run if there is a sudden drop in the share price. Big guys still can trade “after trading hours”.
  • Stock Market can be manipulated and give everyone an illusion but something already happening quietly somewhere. Check the Yield Curve!

Treasury Yield Nov 29-2014

Sit tight and watch the show!

To those retail investors and newbies who believe into those “Get Rich Quick” class and believe it is very easy to make money from the stock market by just copying someone’s proprietary trading system, please think twice! There is no free lunch in this world because even Warren Buffet and Carl Ichan can lose huge money in the stock market.

Carl Icahn loss money Warran Buffet IBM Loss


Continue ReadingThanks Giving Day: Crude Oil Futures drop more than 10%. Big Trouble Ahead?