Trump's victory shakes up the oil markets as the IEA predicts a surplus for 2017

Trump's victory shakes up the oil markets as the IEA predicts a surplus for 2017

Giacomo Maniscalco
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The historic shocker in the US presidential election could mean growth for fossil fuels, with the IEA forecasting a continued oil surplus in 2017

Donald Trump has been elected president of the United States in a surprise win that is causing fossil fuel stocks to soar and spreading uncertainty over the future of renewables given Trump’s campaign promises, which outline an agenda opposite that of the Obama administration.
According to Scott Sheffield, CEO of Pioneer Natural Resources Co., a Trump presidency means a return to drilling in the country, clearing the way for the construction of gas and oil pipelines. In his own words, "His message about creating jobs is why he broke the blue wall.‘ The stocks of companies like Energy Transfer Equity LP and TransCanada Corp., responsible for the Dakota Access and Keystone XL pipelines, are growing as investors hope that Trump will greenlight these currently suspended projects.
The uncertainty surrounding the USA’s energy future also implicates the climate agreement signed by over 200 nations during the COP21 climate conference in Paris. "Climate change policy is going to come to a screeching halt," said Robert McNally, president of energy-advisory firm the Rapidan Group and a former adviser to President George W. Bush. "The Paris Agreement from a US perspective is a dead agreement walking." Many expect Trump’s administration to undo the heavy environmental restrictions imposed by the Obama administration that have provoked a crisis in the coal industry.
Internationally, some sector experts believe that Trump may reconsider Obama-era economic sanctions imposed on Russia. Harold Hamm, the chief executive of Continental Resources Inc. and one of Trump’s key campaign energy advisers, said that he would support Trump taking a harder line on geopolitical rivals in the energy industry. "Some of the countries, Saudi Arabia in particular, have been treated too kindly, because of the large supply of oil," he said. "I don’t think that may be the case in the future." Trump has also been an outspoken critic of the nuclear agreement with Iran, which has enabled Tehran to increase its crude exports this year. The Obama administration has stated that it intends to uphold the agreement in these finals months.
The International Energy Agency (IEA) expects the oil output surplus to persist in 2017 for the third year in a row. In its most recent monthly report, the agency records an 800,000 bpd increase in stockpiles during the month of October, for a total of 97.8 million bpd. The report considers the main culprit to be record production among OPEC members, but also increased output by non-OPEC member states like Russia, Brazil, Canada and Kazakhstan. At the OPEC summit to be held in Vienna in late November, the possibility of freezing crude oil extraction will be discussed, in the hopes of bringing global output down to 33 million bpd. However, many are skeptical that such an accord can be reached. OPEC members have had record output of 33.83 million bpd during the last month, while for non-OPEC states the IEA foresees production to grow by 500,000 bpd in 2017, a figure that diverges sharply from that of the previous year, when extraction went down by 900,000 bpd. The agency also reports that there is no evidence that increased global output of oil is needed: "This means that 2017 could be another year of relentless global supply growth similar to that seen in 2016."