FX COMMODITIES by Michael Stapleton
$60 OR $50 OIL?
Oil at $60 or $50 depends on OPEC, Trump and shale strength in 2017
Te oil market finished 2016 up 40% with OPEC and non-OPEC countries agreeing to cut production. A break above $60 in 2017 depends on three factors. Oil producing nations enforcing the quotas. Te geo-political implications of a Trump presidency. Te increase in United States (U.S.) shale production.
Te agreements made by oil producing countries to curtail historic output are only statements at the moment. As 2017 gets underway and monthly production is data is released, will we be able assess whether the
agreements are being
fulfilled. I remain skeptical as there are numerous economic and political factors that cannot be determined at
62 FX TRADER MAGAZINE January - March 2017
the moment. I believe a lot will hinge on the presidency of Donald Trump and his approach to allies and foes in the Middle East, Russia and China. As well as, potential rise of U.S. shale production.
Iran has managed to rapidly increase oil production since the Joint Comprehensive Plan of Action (JCPOA) was implemented in 2015. Mr Trump has made clear that scrapping the Nuclear Deal is not outside the realm of possibility. Is this political hardball or a serious statement of intent? Nobody knows yet. Adding to the breakdown of the status quo is the Trump / Putin dynamic. Mr Trump does not hide his admiration for the
Russian leader and there are political theories in development outlining an anti-Chinese sentiment behind the bravado. Tis year Russia overtook Saudi as the largest exporter of crude to China. Tis has put Russia and the People’s Republic on good terms. It is possible that through Putin, Trump will enforce a hard line policy on China to settle disputes with neighbours in the Southeast Asia region. Russia might see itself as a superpower, however the country is still in the throes of a recession and desperately needs foreign exchange. Siding with the U.S. against China would immediately effect oil exports. Unless the U.S. along with the European Union (E.U.) liſt the crippling sanctions. Another interesting
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