The Trump effect starts to take its toll on the oil market

The Trump effect starts to take its toll on the oil market

Marcello Vallese
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The first moves of the new administration and the resumption of shale oil extraction will considerably affect price quotations

While OPEC, after the hard-won agreement on the freezing of production levels reached in late November, has pledged to implement the agreement in cooperation with Russia, another market heavyweight has taken advantage of the momentary rise in prices to fully open up the taps.According to the latest estimates by the Energy Information Administration (EIA), in 2017 the USA will produce more than 9 million barrels per day, representing an increase of 5.6% over the previous year. This growth, combined with the OPEC production cut estimated by the Petro-Logistics SA petrol tanker tracking website in January at 900,000 barrels, in addition to the reduced capacity of local refineries to process the oil with low sulphur content extracted from the Texas shale rocks, could push American exports to around 800,000 barrels a day.
Crude oil prices recently underwent a further upsurge, due to renewed tensions between the US and Iran, but aboveall awaiting the next move of the Trump administration, the cancellation of the Dodd-Frank Act. The measure, approved in 2010 by Barack Obama as a response to the financial crisis of 2008, requires greater transparency from energy companies in financial transactions with foreign countries. On the New York Stock Exchange WTI futures due in March reached 54 dollars a barrel, while Brent has exceeded 57 dollars per barrel. The markets have not remained indifferent to the White House memo, that explained how the Dodd-Frank "would impose administrative burdens on American companies that, moreover, could suffer a competitive disadvantage in the face of foreign competitors who are not obliged to comply with similar regulations."
The enthusiasm unleashed by Trump's laissez faire approach has been curbed by the words of International Energy Agency head Fatih Birol. According to the IEA's Turkish director, the recent price stability may be short-lived, given that the world "is entering a period of great volatility", mainly because of the expected increase in US production that will peak this summer, when prices will enable the potential of the still untapped shale basins to be exploited to the full.