Trump’s offshore drilling order can lead to low oil prices: expert

Trump’s offshore drilling order can lead to low oil prices: expert

Baku, Azerbaijan, May 3

By Leman Zeynalova – Trend:

Any increase in US shale oil and gas production will add to the domestic supply in the US, leading to fewer imports, Sijbren de Jong, analyst at The Hague Center for Strategic Studies and expert in energy security told Trend May 3.

He was commenting on the recent decision made by the US President Donald Trump on re-opening for oil exploration the areas that president Barack Obama closed.

“This will then lead to an increase in global oil production, thus having a dampening effect on the price,” the expert added.

In an executive order, Trump reversed the Obama administration's decision to prohibit oil and gas drilling in the Arctic waters off Alaska.

The White House says 90 billion barrels of oil and 327 trillion cubic feet of natural gas are buried off the US coastline.

“We are seeing a kind of seesaw movement whereby the OPEC deal leads to a decrease in oil production (although not every country is on board and some are actually increasing production), leading to a higher oil price. The result is that higher cost oil is more attractive to produce, thus incentivizing the production in places such as the US,” said Sijbren de Jong.

He pointed out that Donald Trump's policies contribute also to stimulating greater production, which in the end may lower the price again, thus undermining the effects of the OPEC deal.

In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.

OPEC agreed to slash the output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 barrels per day.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce the output by 558,000 barrels per day starting from Jan. 1, 2017 for six months, extendable for another six months.
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Follow the author on Twitter: @Lyaman_Zeyn

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