Special Report Q1 2018

Ahoy Political Gamechangers?


  • March-01-2018
Ahoy Political Gamechangers?

I had just sat down on New Year’s Day  to review the results of our GIQ Industry Survey: Energy Outlook 2018 when North Koreaís leader Kim Jong-un came on the television to tell the world he always has a nuclear launch button on his desk. He declared the entire US was within range of North Korean nuclear weapons, adding: ´This is reality, not a threat!â Unsurprisingly, two thirds of the 100 energy industry survey respondents believe that political uncertainty is destined to return to center stage over the coming year. 

It has been a decade since oil prices first broke through the holy grail of $100/bl. But it has been even longer since a notable geopolitical risk premium has played an active role in inflating crude above the natural supply-demand equilibrium. Prices quadrupled between 2003 and 2008, when hundreds of thousands of US troops engaged in battles in Iraq and Afghanistan.  

We saw a few smoke signals emerge through the last quarter of 2017. Oil traders started to pay attention to the increasing number of unpredictable strongmen seeking promotions to the top table at a time when there are not enough seats to accommodate all the booming voices. 

As record inventory levels slowly but surely retreat to their five-year average, 60% of survey respondents expect oil producers to maintain robust compliance to the OPEC-non-OPEC deal to cut production by 1.8m b/d throughout 2018. Still, hiccups of nervousness are creeping into the outlook. 

The majority of those polled believe Brent crude will be around $10/bl higher this year with oil prices forecast to be into the $60s/bl range. If so, it could pump an additional $300m a day into OPECís coffers. 

While North Koreaís determined young dictator was making his latest bellicose threats against the US, President Trump was busy sending his first tweet of the New Year condemning Pakistan, a longstanding ally, for lying and deceit. There may be a new mantra to 2018: ëwho needs enemies when youíve got friends like this!í