Trump Won. What Happens to Oil Now? - Petroleum Courses

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Wednesday, November 9, 2016

Trump Won. What Happens to Oil Now?


If you have been awake in the last 24 hours, you are by now aware that Donald Trump will be the 45th President of the United States. Nearly every poll had him losing by 2 or more points nationally, so no one has yet published what they think will happen due to his triumph
So, here's my "shot in the dark" of predictions. Now, some folks will say, "This isn't really an oilfield topic," but I say it most certainly is. As you see some of my predictions, you'll see why this is true
Interest Rates are Going to Go Up
Janet Yellen is a globalist, which is exactly what Trump ran against. She is going to use the Fed to do everything in her power to submarine the economy, so it can be blamed on Trump by the same media that twisted the polls to make him look unelectable
What has been buoying the economy for the last 8 years has been near-zero interest rates. Yellen and her cohorts have been hinting at rate increases for at least a year. They meet again in December, and you can bet your bottom dollar that a very, very large rate increase is coming. Had Hillary won, the increase might have been 1/4%. With Trump's victory, a minimum of 1/2% will be the change, and it may go as high as 3/4%. And no matter what its effect on the economy, it will go higher still at the follow-on meeting
Never underestimate the power of revenge at all costs from the globalists
This particularly hits the Shale and LTO crowd, as they are the recipients of much of the free money the Fed has been handing out. Without the continuing gravy train, and with debt still up past their eyeballs, the shale players are going to find the hedge funds and venture capitalists less eager to loan them money. Shale is going to be the next "deepwater" in the oil patch. The bankruptcies of the last two years are going to be followed by at least a year of liquidations, as "debt for equity" doesn't look so good with money that is not nearly-free
OPEC will Agree to a Freeze
On November 30, the OPEC members will meet. They now have a foe in the White House, as opposed to a friend. Hillary has been pocketing millions if not billions from the member countries, and they knew she would repay them once she got into office
That money is now completely down the tubes. The OPEC members have to face a reality of Donald Trump coming in and being more business-like in his dealings. They paid their quid for Hillary's quo, and now they've got the Donald standing there. Say what you like about Donald Trump, he's made a lot of money in his lifetime, and he didn't do that by making bad business deals
So, OPEC is going to need to beef up their coffers. There is only one way to do that, and that's to announce a freeze agreement. I have no idea if their exports will actually freeze or go down, but the agreement is now surely coming
The UK Pound will Rebound
If you get paid in dollars, I suggest buying some GBP right about now. At around $1.25 to the pound, that's the lowest you're going to see it for a while. A good forex trader is going to make quite a bundle if he follows this advice
The Brexit was opposed by Obama the Globalist, and he stated that the UK would "go to the end of the line" for trade deals due to their Brexit vote. Trump, though, is an Anglophile, and I would not be surprised to see some very good and very fast trade deals with the UK once he gets into office
US Drilling will not increase dramatically
Trump has said he is for "Drill, baby, Drill," but with Yellen and the other New World Order types sabotaging the economy at every opportunity, the money for the drilling just won't be there. This goes beyond the point above about interest rates. You can be certain that the Bank of America, Wells Fargo, JP Morgan Chase, and every other bank in the land is going to curtail spending and lending. They'll have excuses but they won't really have reasons
These are the same banks that saw the largesse of the US Government "bail them out," when they had failed and should have been closed. Trump would have let them fail, knowing that whichever banks survived would grab the assets at firesale prices, making the economy better afterwards. The bailout destroyed the economy, and it is one of the reasons for the anemic "recovery" that we never had has been as bad as it was
The banks cannot afford to have Trump as president, so they'll do their best to insure it is a one-term presidency
Oil prices will go up
Not immediately, but over the next 6 months, oil prices will rebound to their over-$50 levels. They may go higher, but $50+ is nearly assured. This has nothing to do with the presidency, and everything to do with the OPEC agreement, Russia lessening its aggression, and shale losing its bankers
Green energy - which has always relied on the green of government subsidies - is going to be left to its own devices. Costing at least 30% more than oil is going to make these initiatives less investment friendly, and that means that government-funded projects are going to go away
Trump has said he will cut personal and business taxes. To do this, he's is going to be forced to cut government spending. These will be real cuts, not the old "we spent less than we planned to" cuts we've always gotten before
Prepare for many more ox gorings. Your ox, too, is probably in the mix. I would not be surprised to see government spending actually decrease over the next four years. It would certainly be nice to get more factories and fewer bureaucracies for a change
Because less government cheese is going to be distributed, people will have to work for their money. This means an overall productivity increase, and productivity increases require more energy. More energy means more fuel, and that means more demand for oil
Epilogue
The above is, as I said, a shot in the dark. This is my first glance at the new presidency, and these predictions are nothing but guesswork
If any of them are wrong, I'll give you back TWICE what you paid me for these predictions
?How's that for a deal

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