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OPEC deal expected, impact of Trump on oil unclear, CNBC Oil Survey says

Oil analysts mostly expect OPEC to strike a deal to curb production by Nov. 30 and support prices, though a wildcard is the impact of proposed industry-friendly policies by President-elect Donald Trump.

About three-quarters of the participants in the latest CNBC Oil Survey said they believed the Nov. 30 OPEC meeting in Vienna will finalize a proposal reached in late September to cut production to 32.5 million to 33 million barrels a day from around 33.6 million barrels now.

But the 15 analysts and traders surveyed were divided on Trump's impact on oil prices, with 29.4 percent saying his election would move prices higher. But 23.5 percent said prices could fall, while the same percentage suggested no effect. Then there were another 23.5 percent who said they still don't know what impact Trump's energy policies may produce. Trump endorses the idea of more drilling on federal land and has vowed to remove some regulation on fracking.


Two-thirds of the survey respondents said if OPEC agrees to cut production, it will have to do more than the 750,000-barrel-a-day cut suggested in September in order to have an impact on prices. If it does agrees to change policy, it will be a significant break from its strategy to let the market set prices, established at its November 2014 meeting. That strategy ended up sending oil prices sharply lower, as producers kept pumping more and more oil.

"Just like Thanksgiving 2014 OPEC meeting was a catalyst for global oil markets (to the downside), the November 2016 meeting will also be a catalyst, but this time to the upside," Dan Pickering, co-president of Tudor Pickering, said in a note. "While it will be noisy leading into the OPEC meeting at the end of November, there will be a coordinated action that will support/lift oil prices. This will accelerate the ongoing tightening of the global oil supply/demand balance."

Some industry experts believe OPEC will keep pumping at higher levels even with a deal, and the price may not benefit that much.

"OPEC will likely announce an agreement. Maintenance may give illusion of compliance to deal. OPEC output will rise in Q1 2017," said Kyle Cooper of IAF Advisors.

Fifty-three percent of those surveyed said they expect West Texas Intermediate oil prices to move higher, to $50 to $59 at the end of the year, but 41.2 percent expected prices to stay in the $40s. Another 5.9 percent said they see WTI in the $30s.

"While OPEC may announce a freeze and a cut in production at the end of November, there has been a free-for-all among its members to produce as much as possible since the September freeze announcement," said Andy Lipow, president of Lipow Oil Associates. "I think that in spite of whatever agreement comes out of Vienna at the end of the month, the market will be skeptical that OPEC can bring the self-discipline to its members to actually enact a substantial production cut."

Nearly two-thirds of the respondents said the oil market is rebalancing but more slowly than expected, and a third say it is not yet rebalancing and supply continues to be greater than demand. About three-quarters said they see a slight rise in demand next year, but 22 percent see a significant pickup.

The majority — about 65 percent — expect prices to be $50 to $59 per barrel by the middle of next year, while 23.5 percent expect WTI to be $40 to $49. About 12 percent expected $60 to $69 next year and half of those see it rising over $70 per barrel.

Eight-two percent said the rising dollar will pressure oil. The top concern for the market is supply, with 47 percent citing that as a key issue. Twenty-nine percent point to OPEC, while 11.8 percent point to geopolitics. Another 5.9 percent pointed to domestic politics and 5.9 percent pointed to demand.

"The biggest potential impact of Trump's presidency on the oil markets may well be geopolitics, rather than energy or environmental policy. Specifically, if he does tear up the Iran nuclear deal and — more to the point — unilaterally reimpose US financial and banking sanctions on Iran, that would once again reduce Iran's crude exports by making it very difficult for customers to pay Iran," wrote Michael Wittner, Societe Generale global head of oil research.