IEEJ：February 2017ｃ IEEJ 2017
○Special Bulletin
A Japanese Perspective on the International Energy Landscape (310)February 10, 2017

Prospects for Future Oil/Energy Situation: 26th International Panel Discussion
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn February 9, the 26th International Panel Discussion took place at Nikkei Hall on the future
oil/energy situation, cosponsored by JX Nippon Oil & Energy Corporation, JX Nippon ResearchInstitute, Ltd. and the Institute of Energy Economics, Japan. The panelists at the meeting wereFACTS Global Energy Group Chairman Fereidun Fesharaki, Sierra Oil & Gas Chief Executive
Officer Ivan Sandrea and Nikkei Shimbun columnist Yuzo Waki. I served as moderator. In the 26th
international panel discussion on the matter, the panelists discussed a short-term and medium tolong-term international oil market outlook and natural gas problems including the Asian LNG
market under a new situation including the international oil market after a coordinated oilproduction cut agreement between the Organization of the Petroleum Exporting Countries andnon-OPEC oil producing countries and the inauguration of the U.S. Trump administration. In
the following, I would like to summarize the points that were particularly impressive to me at
the panel discussion.
First, the panelists and I broadly agreed that the present international oil market has remained ina boxed range and that crude oil prices are likely to move within a $50-60 or $50-55 per barrel range
in the immediate future. This view is based on a new market reality brought about by OPEC’s
decision to cut oil production in late November 2016 and its later agreement with non-OPEC oilproducing countries on a coordinated production cut. The bottom of the boxed range is supported by
the effects of the production and supply adjustments and hopes placed on them, while the ceiling iscapped by high-level oil inventories, a possible increase in U.S. shale oil production andspeculations on the possibility. The panelists noted that the crude oil market would remain in relative
stability because the present situation is likely to be unshakable at this moment.
As a matter of course, there are various factors that could change the stability. The coordinatedoil production cut made a good start as OPEC achieved more than 80% of their production cut target
in January. However, the percentage or the compliance of the agreed cut could fall to 70%, 60% orlower levels as indicated by past practices. Meanwhile, there is a potential possibility that an
unexpected supply disruption could emerge to affect the oil supply-demand balance. Other importantfactors that should be watched carefully include the emergence of world economy risks, the impactof crude oil prices’ recovery above $50/bbl on U.S. shale oil production, the effects of the Trumpadministration’s shale oil production promotion policy (and expectations and speculations about thepolicy) as explained later.
As oil prices remaining above $100/bbl until the first half of 2014 had been unsustainable,
prices well below $50 or lower levels would be unsustainable for oil producing countries’ budgets
and economies and investment to cover future demand growth, the panelists pointed out. If1

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downward pressure arises on crude oil prices for some reasons, major oil producing countries suchas Saudi Arabia may conduct verbal market intervention or actual intervention (maintaining orenhancing production adjustments) as necessary. Attention may be paid to what factors would affectthe boxed range expected to remain in the immediate future and how the boxed range itself wouldchange (whether the boxed range would rise in line with “rebalancing” in the oil market).
Second, the biggest matter of concern at the panel discussion was how the inauguration andpolicies of the Trump administration would influence energy markets, as I had expected. Criticisms
against and judicial decisions on U.S. President Donald Trump’s executive order to temporarily entry
ban from seven Middle Eastern and African countries have attracted global attention. At a time when
the world is shaken by the moves of the Trump administration, how the new U.S. administration’senergy and environmental policies could change the international energy situation is the biggest
matter of concern to energy market stakeholders.
At the panel discussion, the panelists discussed the matter from a wide range of viewpoints.
Regarding the first point of effects on crude oil prices, the discussion indicated that downside andupside factors for oil prices are mixed. Cited as an important downside factor for crude oil prices
was President Trump’s shale oil development promotion policy. This policy includes the removal orease of regulation for shale resources development, the development of relevant infrastructure andthe opening of federal land to development. Some of these measures have been put into practice or
specified in executive orders. The policy will undoubtedly help expand U.S. oil supply, although
how production and supply would increase and how fast the policy’s effects would arise may have tobe considered. Meanwhile, President Trump’s protectionist trade policy could exert negative impacts
on the world economy, trade and investment to affect global economic growth, working to decelerate
oil demand growth, although the Dow Jones industrial average on the New York Stock Exchange has
topped 20,000 in the so-called Trump Rally. The two factors will loosen the supply-demand balance,exerting downward pressure on oil prices.
Cited as the first upside factor for oil prices was growth in geopolitical risks in the Middle East
under the new U.S. administration’s Iran and Middle East policy. The administration is well expected
to take a tougher policy against Iran. Tehran’s possible reactions to such policy, its effects on Iran’s
domestic situation, growing U.S.-Iran tensions and rising regional tensions will be potential upside
factors for oil prices as far as other conditions remain unchanged. The Middle Eastern situation
could be complicated further, depending on how the U.S. administration would engage with Middle
Eastern problems and whether the administration would take a unilateralist or interventionist
approach. From financial viewpoints, the panelists noted that commodity investment could expand if
the Trump administration’s economic policy expands budget deficits to accelerate inflation and that
the Trump administration’s financial deregulation could encourage market players to expand
leveraged investment to influence oil prices. In this way, the Trump administration’s policies will
influence international energy markets and crude oil prices through various paths. While this reportfocuses on Trump policies’ influences on crude oil prices, these policies are expected to influence
natural gas, coal, renewable and nuclear energy markets and global warming. Analyzing the impactsof Trump policies will remain significant for how to view the future energy situation.
The panel discussion also provided interesting arguments on improving oil-refining margins in
Asia and the world, their favorable effects on downstream sector earnings and the significance of2

IEEJ：February 2017ｃ IEEJ 2017○business strategies based on such change, as well as what LNG strategies would be required forJapan, Asia and individual companies to procure LNG more flexibly and competitively at a time
when the Asian LNG market is expected to remain a buyer’s market. Thus the panel discussion
gave me an invaluable opportunity for the author, not only as a moderator of the discussion, but also
as a researcher.
Contact: report@tky.ieej.or.jp
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