Oil world cautious on Trump's next move

[LONDON] Oil bigwigs are trying to figure out strategies to deal with the impact that Donald Trump's blizzard of plans to boost the US industry will have on the world market.

If Mr Trump keeps his promises on lower corporation tax, oil sector deregulation and tax incentives on exports, it could lead to an influx of US crude oil - something which may challenge the price rises of the last six months after two years of weakness.

At the International Petroleum Week conference in London, the new US administration's policies were cited as one of the most influential factors on oil in 2017, along with growth of the Asian market and tensions in the Middle East.

Abhishek Deshpande, an analyst at French corporate and investment bank Natixis, told AFP that even if Mr Trump's policies were imposed, they would not necessarily be favourable to the US petrol industry.

"The oil producers may look at it positively, as it will make the US crude oil jump higher. But for the rest of the US, the refiners would feel the pain, and possibly pass on the impact to the public" he said.

"For the rest of the world, the Middle East would have to find new markets, which means more crude to sell," potentially lowering the price, he added.

Energy Security Analysis Inc president Sarah Emerson also warned that Mr Trump's ideas could be difficult to implement.

"All of that is working against the huge question about deficit, and some Republicans and all the Democrats would have to object," she said during a speech at IP Week.

She said political change in the US "could bring about a marginal deterioration in our market".

Mr Trump could also tackle deregulation in the energy sector, wiping out the regulations put in place by his predecessor Barack Obama, without a vote in Congress.

Last but not least, oil industry insiders said Mr Trump's unpredictability in geopolitics could give rise to dramatic swings in the market.

"The most significant problem would be the tense relationship with Iran, but there is also Mexico," Mr Deshpande said.

Mr Trump has called the agreement between Tehran and world powers over its nuclear programme "one of the worst deals I've ever seen".

And as for Mexico, Mr Trump has promised to renegotiate the North American Free Trade Agreement, which he says is too stacked in Mexico's favour, and has not ruled out ditching it entirely.

Such measures would disrupt exports from Iran and Mexico, which would then look for alternative markets for their production and could lower world prices.

The uncertainties surrounding the new US president did not seem to trouble Mohammed Barkindo, secretary general of the Organization of the Petroleum Exporting Countries.

"Republicans tend to like the oil industry. We welcome the new Republican administration," he said, reminding his audience that the United States is Opec's most important export market.



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