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In his speech to World Economic Forum attendees. President Trump made it clear he wants OPEC to lower oil prices. But actually getting lower prices lower may be more difficult than he made it sound.
TD Cowen Managing Director Jason Gabelman explains that US policy is part of the reason for the recent rise in oil prices (CL=F, BZ=F) and that Trump may actually cause them to rise more.
"Trump adds additional risk to that with strong, very hawkish views against Iran, potential to limit Venezuelan crude exports and risking additional crude that's currently being supplied to the market. So the whole notion that OPEC needs to add barrels to the market and they're the reason that oil prices are currently high seems to not factually be the case."
Trump also wants to increase oil production in the United States, but Gabelman notes that, too, may face pushback.
"US companies and energy stocks have benefited from being more rational in how much capital they deploy into the oil field and how much they drill. And the stocks have been awarded for reducing CapEx spend and returning more cash to shareholders. If they drill more oil, that's a reversal of that trend and you would expect the stocks to weaken. So I don't expect companies to start to ramp up spend in oil fields and really rapidly expand the amount of oil that they're currently producing."
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Watch the video above to hear more from Gabelman on the impact of Trump's tariffs plans on oil prices and his top pick in the energy space.
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This post was written by Stephanie Mikulich.