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Energy Stocks

Yes, We Shale

By Elliott H. Gue, on Nov. 16, 2016

In the short run, the results of the US election will have minimal effect on crude-oil prices, leaving weekly US inventory data and incoming news about OPEC’s meeting at the end of the month to drive West Texas Intermediate.

This week, the Energy Information Administration reported that US oil production surged by 170,000 barrels per day—another sign that the recovery in the rig count and stepped-up completions of drilled wells have started to contribute to supply.

OPEC also reported that Iran boosted its oil output by 210,000 barrels per day last month, the most since sanctions were eased in January. Overall OPEC output likely climbed to about 34 million barrels per day, depending on which estimate you consider. Both developments suggest that reaching an agreement to reduce production will be a challenge. A credible deal would require Saudi Arabia and other members of the Gulf Cooperation Council to make significant cuts.

We put the odds of OPEC announcing a deal at 50-50, though the likelihood increases as oil prices tumble. Nevertheless, the chances that the upcoming meeting will yield a deal that meets or exceeds market expectations appear low.

When evaluating how President-elect Donald Trump’s policies could affect the energy markets, investors should consider his critical comments about the treaty that removed economic sanctions on Iran. On the campaign trail, Trump threatened to rip up the deal.

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