Oil, A Geopolitical House of Cards

Apr 06, 2018 | Frank Sakellariou


On March 13, President Trump announced the firing of Secretary of State Rex Tillerson and nominated CIA Director Mike Pompeo to succeed him.
In a recent RBC Capital Markets report, commodity strategist Helima Croft explains that the appointment of Mike Pompeo presents a bullish case for oil with “important implications for Iran and Venezuela”. Helima is a Managing Director and the Global Head of Commodity Strategy at RBC Capital Markets, specializing in geopolitics and energy. She is also a member of the National Petroleum Council, a select group of individuals who advise, inform and make recommendations to the Secretary of Energy.
Iran and Venezuela produce a combined 5.4 million barrels of crude oil per day, making them influential players in the global oil supply/demand balance.
"Rex Tillerson had been a moderating influence in the Trump administration. He had argued for maintaining the Iran nuclear agreement. He argued against very tough economic sanctions on Venezuela...With Pompeo, a known hawk taking the top diplomat job, I could see Trump easily making the decision to not renew sanctions waivers on May 12 effectively ending U.S. participation in the Iran nuclear deal."
Helima said on a CNBC video interview, available here.
A U.S. exit from the Nuclear Agreement could see the implementation of fresh economic sanctions on Iran, significantly impacting Iranian crude oil production as foreign refiners would be forced to source less Iranian crude.
Tillerson’s exit could also set the stage for more U.S. measures against the Maduro government in Venezuela and more barrels of oil removed from the market. Pompeo will likely call for increased sanctions on Venezuela, previously highlighting the risks that Venezuela poses to the U.S.
"Venezuela could become very much a risk for the United States of America...American policy is to work with our Latin American partners to try and restore democracy" he told Fox news.
Geopolitical risk is once again becoming an important factor in the oil sector. A factor that we will be watching closely.
“May may prove a monumental month for the oil markets given the changed landscape in Washington.” - Helima Croft