Oil falls as focus returns to OPEC after Trump election surprise

Bloomberg

Oil fell as the market’s focus shifted from the shock of Donald Trump’s U.S. presidential election victory to questions about OPEC’s ability to rebalance crude supply and demand.
Crude futures declined as much as 1.9 percent in New York, erasing earlier gains after the International Energy Agency said prices may retreat amid “ relentless global supply growth” unless the Organization of Petroleum Exporting Countries enacts significant output cuts. The dollar rose to an eight-month high against its peers, putting downward pressure on commodities priced in the currency.
Traders are weighing the implications of a Republican again presiding over the nation that consumes more oil than any other — and is one of the biggest producers too. Trump has promised independence from OPEC and some of his energy policies include opening federal lands for energy production and freeing up offshore areas to development. While investors took comfort from a conciliatory acceptance speech on Wednesday, a surge in U.S. crude supplies served as a reminder of the massive global glut, which the IEA said could persist through 2017.
“The IEA report showed that OPEC production has climbed to a new high, which is cause for concern,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “When we thought they were about to put their foot on the break, they were actually putting their foot on the accelerator.”
West Texas Intermediate for December delivery fell 71 cents, or 1.6 percent, to $44.56 a barrel at 9:20 a.m. on the New York Mercantile Exchange. Prices closed up 0.6 percent on Wednesday, erasing an earlier 4.3 percent slide as Trump’s pledge to unite divided political factions prompted a reversal in the knee-jerk sell-off. Aggregate trading volume on Nymex showed 1.768 million contracts changing hands, according to updated data on Thursday.
Brent for January settlement slipped 55 cents, or 1.2 percent, to $45.81 a barrel on the London-based ICE Futures Europe exchange, trading at a 56-cent premium to January WTI. The global benchmark crude rose 0.7 percent to $46.36 on Wednesday.
The next test for the oil market is whether OPEC can finalize an agreement to curb production at an
official meeting on Nov. 30. Iranian Oil Minister Bijan Namdar Zanganeh is optimistic an accord will be reached when members meet in Vienna, the Oil Ministry’s news agency Shana reported.

Iran Deal
It’s still too early to tell what impact a Trump presidency could have on the nuclear deal that enabled a resurgence in Iranian production, said Eni SpA Chief Executive Officer Claudio Descalzi.
Non-OPEC producers such as Brazil, Canada, Kazakhstan and Russia will raise output by 500,000 barrels a day in 2017, the IEA said in its monthly report. That presents a challenge for OPEC, whose own output has also been increasing. While the market would move from surplus to deficit quickly in 2017 if OPEC implements its Algiers accord, the group will need to agree to “significant cuts,” the IEA said.
U.S. crude inventories rose by 2.43 million barrels last week to 485 million, according to an Energy Information Administration report on Wednesday. The nation pumped 8.69 million barrels a day in the week ended Nov. 4, the most since June.
“Prices could fall to $40 or perhaps a little bit lower, especially in the absence of a deal” by OPEC, Abhishek Deshpande, an analyst at Natixis SA, said in a Bloomberg Television interview. While President-Elect Trump may take measures to support the American oil industry, “U.S. production rising is only going to put further pressure on oil prices,” Deshpande said.