The True Edge
A Navarik Market Update
After the dramatic Iraqi military operations in Kirkuk to pre-empt independence by the Kurdistan Regional Government, oil markets have been particularly uneasy. Not without reason, since arguably no industry has proven more susceptible to geopolitical risk than oil. The situation is compounded by the fact that there exists some uncertainty as to the scope of the disruption, with Genel Energy (one of the international oil companies most exposed to this play) assuring investors that they have so far been able to operate normally while Chevron declared they have halted all drilling and exploration work. We earlier addressed this crisis and indicated that the true market effects may depend on the response. We should also add now that the wider oil market has changed somewhat since the Kurdish referendum took place, compounding the effects.
Since the referendum, a stronger bullish sentiment has taken hold. OPEC General Secrety Mohammad Barkindo, bolstered by internal research that suggests global supplies is returning to historical norms, this week said a balanced oil market was in sight and triumphantly chided sceptics. Likewise, a proliferation of data suggesting that the shale boom may have run out of steam has also undercut the case that US tight oil production could continue to fill the gap. Navarik Data can now add that analysis of our proprietary inspections-based data set on confirmed marine movements suggests that not only were September exports down for some of the global oil export market’s biggest players, the projection based on data in October suggests that we may see further slides. It’s important to note that many of the countries have other avenues to move their product, but the trend still remains that overall less oil is set to flow across the waters in the first part of Q4 2017 as did in Q3, which in turn saw relative declines from Q2. This should support Barkindo’s case, although perhaps the mechanism for the price adjustment has been overstated.
For months, there have been a succession of geopolitical crises (the Venezuelan economic collapse, the Qatar Blockade, etc.) that had the potential to raise the stubborn floor of global oil prices and give OPEC their victory. It appears we might have it in the form of the Kurdistan Crisis, but the timing of this crisis and the overlap with the natural market shifts should not be neglected in any honest diagnosis of global oil prices.
Colin McCann is an Oil & Gas analyst with Navarik Corporation. The Navarik Data Products team analyzes Navarik's proprietary data sets and external sources to provide insights into the oil & gas shipping market. The resulting analysis enables physical and paper traders to see ship movements across the barrel before anyone else in the market.
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