Oil prices continued to sink on Monday, as Obama’s signature on the Renewable Fuel Standard programme (RFS) and doubts over this week’s OPEC meeting affected the market.
Brent Crude futures sunk 2 percent in Asian trade on Monday, following from a 3.6 percent fall on Friday as investors began to doubt the effectiveness of the OPEC meeting set for later this week.
There were hopes that the Vienna meeting, which begins today, would alleviate long-standing tensions between Iran, Iraq and Saudi Arabia and agree an output cut or freeze.
Last week also saw the Obama administration signed its final plan for renewable fuel use in the United States, creating problems in the American oil market and leaving President-Elect Donald Trump with a difficult situation to contend with as he enters office.
The RFS program requires energy firms to blend ethanol and biodiesel into gasoline and diesel and is designed to cut greenhouse gas emissions, reduce US reliance on oil imports and boost rural economies.
This represents a problem for Trump, who had a strong voter base in the rural Midwest, whose many farming businesses stand to benefit from the new legislation. However he also committed to curtailing regulations on the oil industry, who say the new regulations will make their business more difficult and expensive. The new act, first signed into law by President George W. Bush, will throw Trump into the midst of a political balancing act between Big Corn and Big Oil.
Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets, told Reuters: “It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump’s policy may not be so good after all”.
WTI Crude is currently down 1.09 percent at $45.46 per barrel, with Brent Crude down 1.12 percent at $46.71.