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Global Energy Advisory 8th September, 2017

Oil

OPEC Deal “Has No Impact” on Crude Oil Market

Russian Rosneft CEO Igor Sechin on Friday stated that the recent uptick in oil prices had nothing to do with curbing crude oil production among OPEC or non-OPEC countries; rather, he said, this is all about a weaker dollar. Taking this further, he stated that the OPEC deal has zero impact on the crude oil market.

"The Americans support their shale oil producers through dollar depreciation. I believe that the OPEC deal has no impact on the market, it is the dollar devaluation," Sechin said.

This comes ahead of OPEC’s next meeting in late November, when the group will decide whether to extend the production cut deal for another six months. While the U.S. dollar depreciation is boosting shale producers, for the Saudi’s extending this deal will come down to the planned IPO of giant Saudi Aramco. Sechin’s take? If this IPO goes through, the Saudis will be much more interested in higher oil prices, and it is this that will likely determine what happens in November.

Keeping an eye on this IPO is also key for playing the currency hedge game. A successful IPO will go a long way towards indicating that the Saudis are gaining ground in the reforms laid out in Vision 2030. Any considerations of a depeg of the Saudi Riyal from the dollar will most likely be based on this. Right now, our take is that a depeg isn’t going to happen any time soon.

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