OPEC's Gifts to Trump

https://trendmacro.com/system/files/reports/20181114TrendMacroWarren-80.pdf
Donald L. Luskin
Michael Warren
Wednesday, November 14, 2018
Production limits are coming. They'll support prices and transfer market share to the US.
Strategic view: 

Oil has broken through the bottom of our expected trading range as the US grants temporary waivers to eight nations from secondary sanctions on Iran oil imports. We are lowering our expected range to $60-to-$70, treating today's lower prices as a panic undershoot. OPEC will likely impose production targets at its upcoming meeting, which should be effective considering that the prior targets succeeded in rebalancing global petroleum stocks to normal levels. European nations without waivers will still have to back off Iranian oil, and further sanctions will click in soon enough. Meanwhile, crude demand from emerging economies -- especially China – has slowed to a halt, while US production surges to new highs. OPEC will have to cede market share to the US, where production is moving to new highs and transport bottlenecks are finally clearing. OPEC has learned that price is more important than market share, and is not likely to repeat the 2014 mistake of free-for-all production.

Market(s): 
Author Override: 
Michael Warren and Donald Luskin