ENERGY MARKETS REACT TO ROCKY GEOPOLITICS
ENERGY MARKETS AND GEOPOLITICS ARE PERMANENT BEDFELLOWS, BUT THE RELATIONSHIP IS SET TO GET PARTICULARLY TRICKY IN 2016. GULF GOVERNMENTS’ BUDGETS ARE UNDER RISING PRESSURE AS OIL PRICES SINK TO BELOW $30 A BARREL (BL) FOR THE FIRST TIME IN 12 YEARS AND RELATIONSHIPS DARKEN WITHIN OPEC AND WITH NON-OPEC PRODUCERS.
Nigeria's oil minister and 2015 OPEC President Emmanuel Ibe Kachikwu recently hinted at an emergency meeting in April; a statement welcomed by OPEC's less wealthy members that have called on OPEC linchpin Saudi Arabia since November 2014, to change the group's policy to maintain market share. Nigeria, Algeria and Venezuela are just a few that are particularly feeling the pinch.
But the stalemate is likely to continue. The UAE Energy Minister Suhail Mohamed Al Mazrouei has questioned how an OPEC meeting would address the whole problem while non- OPEC members' oil production must also be curbed. Oman, the largest non- OPEC oil producer in the Gulf, said the Sultanate would slash 10% off its total production of just under 1 million b/d if other oil producers in both camps followed suit. Yet, different philosophies persist and the oversupply will probably just get worse as Iran hopes to bring up to an additional 1million b/d to the market in 2016 following the lifting of sanctions in January.
Gulf OPEC members enjoy thicker profit margins and foreign exchange reserves, but a bout of global headlines illustrate how their economies are far from