Oil and Gas 360: the Trump ‘side effect’
From the stocks’ uncertainty to the pipeline’s manufacturing reestablishment: the new elected 45th US President keeps pushing to boost gas and oil outputs
“Making America ‘Crude’ Again”. This the buyword resounding like a commercial – and spotted by the newspaper – after the last new elected 45th US President Donald Trump’s speeches. How the Trump’s policy could affect the oil and gas market is still undoubtedly hard to sentence. However, barely hours after Trump had taken office, a revised White House website has declared its new found pro energy industry credentials.
That’s the way on which – after three days into his presidency – Trump gave his explicit backing to two controversial pipeline projects: Dakota Access and Keystone XL, providing American steel for their construction.
Nevertheless the presidency of Donald Trump, who made promises on the campaign trail to boost US oil and gas output and roll back regulations unfriendly to industry, is expected to be a stark policy departure from President Barack Obama, who spent much of his political capital over the past four years pushing efforts to combat climate change.
Furthermore, Trump reiterated his creed that pipeline makers use U.S. materials when they build projects in the United States, another sign that he will keep pressure on companies in the middle of the energy sector.
Crossing the boundaries, Mexican gasoline market reforms could influence U.S. gasoline export trends. In facts, the government is in the process of opening its gasoline and diesel markets to outside competition and replacing government-set prices with market-based prices. Last year, Mexico began allowing entities other than the state-owned company Petróleos Mexicanos (Pemex) to import gasoline and diesel and open retail stations. These changes followed previous energy sector reforms that ended Pemex’s upstream monopoly and opened the oil and natural gas sectors to foreign direct investment. Although Mexico is a large crude oil producer, it relies heavily on imports of gasoline from the United States to meet domestic demand. Therefore, the outcome of gasoline market reforms in Mexico may have significant implications for the sale of U.S.-produced gasoline.
The volume of gasoline trade between Mexico and the United States is significant to U.S. refineries. Over the past five years, U.S. exports to Mexico accounted for between 44% (2014) and 54% (first 10 months of 2016) of total U.S. gasoline exports. On a year-over-year basis, U.S. gasoline exports to Mexico increased by 71,000 b/d in 2015, with additional average growth of 75,000 b/d over the first 10 months of 2016, when U.S. exports to Mexico averaged nearly 390,000 b/d.
Based on projections in EIA’s January 2017 Short-Term Energy Outlook (STEO), natural gas prices are expected to increase in both 2017 and 2018. Rising natural gas prices could lead developers to postpone or cancel some of the upcoming power plant additions. Construction timelines for these plants are relatively short: more than half of the natural gas-fired generating capacity scheduled to come online in 2017 and 2018 was not yet under construction as of October 2016.
Stock and trading
On the New York Mercantile Exchange, light, sweet crude futures CLH7, +1.43% traded at $52.43 a barrel, down 20 cents, or 0.4%, in the Globex electronic session. Brent crude LCOH7, +1.05% on London’s ICE Futures exchange fell 9 cents to $55.14 a barrel. U.S. oil production now stands at 8.96 million barrels a day, according to the U.S. Energy Information Administration.
According to a BMI Research report, North America, the Middle East and parts of Asia will lead the recovery in oil and gas spending over 2017. The reports told that spending on oil and gas in North America is expected to raise by more than 17% this year.