Energy Market Watch: May 2017

It’s that time again. Time for a look at this month’s calendar — to circle the dates that could create ripples across the energy market and global economy.

Here are five important days to watch in May.

May 7: French Presidential Election

The outcome has been determined.

That said, politics in the western world have offered no shortage of surprise outcomes of late as a resurgence of populism, nationalism and economic protectionism has left pundits and pollsters rethinking their methodologies.

In France, Marine Le Pen and her supporters were hoping to ride this wave. But standing in her was was front runner and ultimate victor Emmanuel Macron — an outsider in his own right.

As their debates showed, the two candidates had no shortage of differences and energy policy was no exception:

• Macron supports aggressively boosting renewable capacity while aiming for a phase-out of some of the country’s significant nuclear fleet.
• Le Pen, on the other hand, took a more pro-nuclear town, coupled with a measured approach on renewable energy.

Marcon’s win provides a clear view of the country’s energy future, at least for the next five years.

May 19: Iranian Presidential Election

France isn’t the only country with a major election this month. On May 19, the people of Iran will take to the polls to decide whether to grant current President Hassan Rouhani another term. Polls show that the economy is clearly the number one issue this election. To that end, President Rouhani has presided over a stretch of steady economic growth. Still, his re-election isn’t guaranteed, particularly as conservative groups take issue with Rouhani’s endorsement of Iran’s deal to end its nuclear program in return for sanctions relief.

That leads us back to the usual question: what does it all mean for energy?

As it turns out, quite a bit. A vote for Rouhani is essentially a vote for the status quo, including the Iranian nuclear deal, which helped the country restore more than one million barrels per day of lost oil exports. On the other hand, a switch to a more hardline candidate could threaten the deal’s solvency. More than that, it could fuel already heightened tensions between regional rival Saudi Arabia. That’s especially important since energy markets currently expect the two to cooperate at the…

May 25: OPEC Meeting

OPEC meetings always manage to catch the eye of global energy markets, but they don’t often deliver much in the way of results. At the cartel’s May meeting, though, the expectation of market-moving news might be well-founded with analysts predicting an extension of OPEC’s current production deal. With the move largely priced in at this point, a confirmed coordination effort is unlikely to send oil prices rocketing higher.

However, if the group fails to reach a consensus, oil and energy prices could plummet as the group’s members rush to turn on the taps. That may not be as unlikely as it seems with tension between Saudi Arabia and Iran, two of OPEC’s three biggest producers, holding near recent highs.

May 26: G7 Meeting

To quote the great newsman (and statesman?) Ron Burgundy, when the world’s national heavyweights get together, it’s “kind of a big deal.” The G7 is exactly that, as the US, Canada, Japan and representatives from Europe gather to discuss the world’s pressing economic issues. Besides Russia’s absence again this year — hence G7 instead of the usual G8 — the group will have no shortage of political turmoil to discuss.

Donald Trump is likely to garner plenty of the public spotlight and the group will also welcome the newly crowned victor of France’s presidential election. Energy and climate change will be among the more pressing items on the agenda. Most importantly, various heads of state will likely seek clarity on crucial energy questions such as:

• Continued US participation in the COP21 agreement.
• The future of nuclear energy in countries, e.g. France, Germany and Japan.

The answers to those questions have far-reaching implications for power and overall energy prices, both in the near-term as well as for years to come.

Check back next month or reach out to a market analyst for additional insight.

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