Opinion

Trump Flips Oil Prices




Last week, the US launched 59 Tomahawk missiles against the Syrian government in response to chemical gas attacks on its own the civilian population there. Then later in the week, the US announced that it has dropped the GBU-43/B Massive Ordinance Air Blast (MOAB) bomb – better known as the Mother of All Bombs – for the first time in Afghanistan, targeting an underground network of ISIS insurgents. More worryingly, the Trump administration has opened the possibility it may launch a first strike against North Korea.  US warships are already gathering around South Korea, joined by some Japanese battleships as well, while on the other sides, reports have come in that China is amassing as many as 150,000 troops along its North Korean border.

Crude oil promptly rose on the news about the Syrian missile attack. Considering that from the last 3 years of on-going conflict in Libya, northern Iraq and Yemen in which the market completely ignored any substantial risk to oil supply, the events last week seems to be taking a different perspective. The market appears to be considering real geopolitical risk arising from the new conflicts at play now. Regardless if nothing comes out of it in the ends.

Concerns are growing about the possible reversal of the Iranian nuclear agreement, which may result in a cut of Iranian supply. Where there was optimism of US – Russian relations is now looking the other way. The prospect that Donald Trump will remove trade sanctions on Russia is now looking more remote than ever. But more worrying is the situation in North Korea. A first strike on the part of the US could trigger a disproportionate retaliation by the belligerent nation, with South Korea caught in the crossfire. An important hub for oil and gas refining and trade in the region, most of South Korea' important oil and gas facilities are in the safer southernmost part of the peninsula, but capital Seoul is less than 60km from the North Korea border. If North Korea has a nuclear-capable weapon, as is widely suspected, carnage could be unleashed, engulfing not just the Korean Peninsula, but Japan and China as well.



The issue of geopolitical risk can also be linked to the unpredictable nature of the current White House and Mar-a-Lago (depending on the day of the week). It has been a week of unprecedented flip and flops in relation to several core election promises.  Trump's more extreme campaign promises abated this week, to the chagrin of some of his more right-wing supporters. He failed to label China as a ‘currency manipulator' during his meeting with Chinese premier Xi Jinping, which would have likely started a disruptive tit-for-tat trade war. He walked back on his claims that NATO, saying the organisation was no longer ‘obsolete'.  Oil traders are wary that Trump may not have consistent policy viewpoint on how far he will go with the growing conflicts. His promise to not divulge military plans as a measure to keep his enemies guessing, may just keep the markets guessing as well, creating uncertainly.

The issue about geopolitical risks, also comes at a time when the market appears to be tightening up. OPEC is predicted to proceed with the cuts in May, allowing for further excess stock depletion. This could put the market into recovery mode in the next half of the year. Any unexpected or perceived shocks to supply from wars or sanctions may drive prices up further.


Visit source site

https://nrgedge.net/article/1492437847-trump-flips...

More items from easwaran


American LNG Expands Globally

Under the previous US administration, the US LNG industry made cautious steps towards global acceptance. Recall that it took years for the US to finally allow Cheniere to export natural gas in 2011, a privilege extended to a few other companies since, including Cameron Energy's site in Louisiana and ...

Easwaran Kanason


Posted 3 days agoOpinion

Expect Bumps Ahead

Earlier this week, Malaysia's Petronas said that it would support any extension of the OPEC oil output cuts. In January, Petronas voluntarily announced an output cut of 20 kb/d in support of the landmark agreement between OPEC and non-OPEC countries. That is a drop in the pond in comparison to the ...

Easwaran Kanason


Posted 12 days agoOpinion

Black is back!

It's earnings seasons again and for oil firms, the numbers have not looked this good for some time. ExxonMobil, Shell and BP profits all surged, and Chevron moved back into the black. Elsewhere, profits have generally been up over the first three months of 2017, as firms reap the benefits of years o ...

Easwaran Kanason


Posted 18 days agoOpinion

The Australian Gas Paradox, So Much Yet So Little

The unique conundrum of natural gas in Australia has just heated up. The country's government has unveiled a plan that will effectively allow it to cap and restrict exports of Australian LNG to meet domestic shortages of natural gas. Predictably, Australian LNG producers – who have invested billi ...

Easwaran Kanason


Posted 24 days agoOpinion

Reimagineering Malaysia’s Oil & Gas Industry

Conservative estimates suggest that in the wake of oil prices crashing in late 2014, the Malaysian oil and gas services and equipment (OGSE) sector contracted by at least 11%. Analysis of overall financials for the OGSE sector by the Malaysian Petroleum Resource Corp, an agency under the Prime Mi ...

Easwaran Kanason


Posted 1 month agoOpinion
All posts from easwaran