One reason why oil prices have rallied in 2019 is the uncertain future for many OPEC member states.
Political and security crises have deepened or awoken in places like Algeria, Libya, Venezuela, Iran and Saudi Arabia, creating a sense that big chunks of oil supply could be erased overnight.
The timing was therefore right to stop by the New York Energy Forum, which recently hosted an event titled “OPEC and the geopolitics of the oil market.”
The speaker was Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets and frequent contributor on CNBC.
Here are a few memorable takeaways we heard:
-OPEC is likely to extend the deal for the duration of 2019 when they next assemble in Vienna in June.
-Saudi Arabia has made it clear they would like this to be a four-year deal and is showing no signs of wavering in the face of renewed pressure from Washington.
-Crown Prince Mohammed bin Salman (MBS) is resonating with young Saudis, promising a future of prosperity and diversifying beyond crude oil.
-While shaking up old ways of doing things, his disruptive ways have alienated older elites within Saudi Arabia, causing some tension.
-MBS is juggling quite a bit politically and economically, culminating in Saudi’s higher price target than some other Gulf neighbors, such as UAE.
-Russia is enjoying the soft benefits of a higher price environment. However, due to the prevailing tax structure in Russia, the upside isn’t necessarily flowing to oil companies, but rather to the Russian government.
-Russian Energy Minister Alexander Novak is essentially the de facto co-Head of OPEC.
-OPEC has seemingly become a vehicle for soft (and growing) Russian influence.
-Rebuilding Venezuela will require billions of dollars and international effort.
-A reconstruction effort will require debt restructuring that is larger and more complex than in Italy or Greece.
-How much longer can OPEC endure lower for longer? The “Fragile 5” (Iran, Libya, Venezuela, Nigeria, Angola) might be adding a sixth member to the growing list of OPEC countries experiencing involuntary production declines – Algeria.