Americas News
Venezuela, Trump Cited as Geopolitical Wildcards That Could Lift Oil Prices to $80/bbl
Now that oil is on the previously unthinkable verge of surpassing $70 per barrel, analysts are becoming inclined to think that the sky is the limit - with some going so far as to believe U.S. president Donald Trump's hawkish stance could lead to war and boost prices to $80.
Ed Morse was among a team of Citigroup Inc. analysts who in a new report predicted that "wildcards" including war, Middle East tensions, Trump, and Kim Jong Un could drive crude toward that lofty level.
The report stated that the U.S. president shifting the focus to geopolitical risks with his pursuit of sanctions on Iran and North Korea potentially has significant consequences; also, political disturbances in Iraq and Libya could see crude supplies decline, boosting oil prices.
Citigroup singled out Trump as the most likely risk to commodities this year as he "disturbs" the world order.
DNB Bank believes there will be plenty of disruption on the world scene that could affect oil this year, but not by Trump per se; instead, Torbjorn Kjus, oil market analyst for the bank, remarked, "The Venezuelan economy could collapse at any moment: we could envisage scenarios spanning from outright civil war to a state coup, to a general strike or even just one more year of strangulating slow death for the economy.
"Neither of these outcomes bodes well for Venezuelan oil production."
Venezuelan crude output plummeted in December to 1.70 million barrels per day, according to the latest S&P Global Platts survey, and it has been estimated that the Bolivian republic needs 100 to 110 active rigs to reverse its production decline (it currently has 50).
Michael Cohen, head of energy commodities research at Barclays, resisted the temptation to discuss geopolitical risk and its effect on the market in 2018; however, he told Bloomberg television that "we expect inventories are going to build this year - slightly, not at the rate rate we saw in 2014 and early 2015, but they're still going to build.....all in all, on a balance basis, we don't see the kind of supply shortage to bring us to $80 on as sustainable basis."
Meanwhile, as if to demonstrate that global oil trading is not for the faint hearted, sources close to the matter told Reuters that Noble Group is closing down its London oil desk and winding down its Asia oil operations, with heavy losses and high debt forcing the commodities trader to restructure.
The Singapore-listed company, founded in 1986 by Richard Elman, is reportedly returning to its roots as a hard commodities business in Asia, mainly involved in coal marketing.
Although this week's remarkable crude prices have caused far more worry than jubilation, Standard Chartered is shaping up to be the lone voice of optimism for 2018: earlier this week it stated in a note that "We expect oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019; in our view, the back of the Brent and WTI curves are both still underpriced [and] we do not think that prices below $65 per barrel are sustainable into the medium term."
