REFILE-CERAWEEK-For oil traders, a vexing new risk: U.S. politics

Sun Mar 2, 2014 4:14pm EST
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By Jonathan Leff

NEW YORK, March 2 (Reuters) - Oil traders are past masters at handicapping geo-political risks, from war in the Middle East to resource nationalists in Latin America. Lately, they face another confounding political landscape: Washington.

As a bounty of shale oil transforms the trading landscape across North America, U.S. policymakers are being confronted with a host of issues that hold immediate and material implications to energy companies, investors and traders.

While energy policy has typically moved at a steady, stately pace for much of the past few decades, Washington is now grappling with a host of pressing questions that will affect oil prices: easing a crude oil export ban that could raise domestic crude prices; adjusting ethanol quotas in order to curb gasoline rates; imposing new rules on tank car safety that could slow the nascent oil-rail boom.

These issues are coming to the fore amid wider policy shifts under President Barack Obama that have forced oil traders to pay closer attention to what's going on in Washington, a place many find hard to pierce.

"When you think about the long-term viability of the U.S. energy boom, whether its fracking or infrastructure, policy questions are coming into play," said Robert McNally, president and founder of The Rapidan Group, an advisory firm.

"There is definitely more attention and interest on part of oil market participants," said McNally, who worked for hedge fund maven Paul Tudor Jones before a two-year stint as senior energy advisor to President George W. Bush.

Much of the industry has been caught out in recent years by a number of unexpected decisions, from Obama's more liberal use of strategic petroleum reserves in 2011 to the drawn-out battle over the TransCanada Corp's Keystone XL pipeline.   Continued...