I can’t help but notice lately the audible and visual politically biased hyperventilating going on that curiously coincides with the upcoming Trump coronation and the OPEC/Non-OPEC coalition cuts.
I have avoided commentary on the late November OPEC production cut announcement, waiting to see if their country cousins outside of the Cartel jump on the band wagon du jour. So pun-a-phorically speaking, it’s a deal until we cut the deck on the cuts and see who is dealing the cards.
Although there are 12 OPEC and 11 non-OPEC players in the game, only a very few actually matter and those that do matter don’t really trust or like the other matterists. Without a supply dialogue between Russia, Saudi Arabia, Iran, and Iraq, this whole Broadway musical becomes a carnival sideshow.
With the ink still drying on the agreement, we are already seeing cracks in the coalition. The OPEC November production was the highest on record, which will make any cutback in production to the appointed levels even more difficult to attain and dubious to maintain. Iraq has announced increased, not lower, exports for January. China, sensing a market share grab opportunity, has also announced an increase in January production.
The key question here is how do they verify that the 23 signers of this collusionary scheme are adhering to their own supply limitations?
Well, you appoint a classroom monitor and who better than the president of Russia – the largest crude oil producer on the planet. Russian President Vladimir Putin, being a former KGB operative, is certainly well qualified in the skills of enforcement, a trait that will strike fear into those producers seen breaking the rules, unless of course he chooses to break them himself.
I have to ask the question: Does Vlady really need to bow to the quirks and quarks of the Saudis, Iranians and Iraqis?
Not at all.
The closer we get to the coronation of Mr. Trump, the sooner he can stop using the caps in OPEC. The president elect has nominated Rex Tillerson, a current CEO of Exxon Mobil – the world’s largest publicly traded oil company – to Secretary of State. Tillerson has a noted working relationship with the Vlad Man and was even given the Russian Order of Friendship in 2013.
Trump’s choice for the head of the EPA is the resident Attorney General for Oklahoma, Scott Pruitt, who, during his tenure took great delight in suing this very same federal department he will soon be head of, sometimes referred to as the Economic Prevention Administration.
It gets better – as reported in the New York Times, the new Energy Secretary is the former governor of Texas, Rick Perry, who ran for office in 2011 and during a live televised debate racked his brain trying to remember the three departments he wanted to dismantle – “Ooops,” Perry said. He mentioned the Commerce and Education Departments, but could not recall the third: the Energy Department.
As Trump’s key advisors continue to take on the characteristics of a Ponderosa Posse it must be clear to Mr. Putin that his best option is not with OPEC but to side with his new best friends, the US of A. The potential for this energy bond strengthening grows with every Trumptarian proclamation for energy independence from “our enemies.” He wants the Keystone XL Pipeline resurrected, new refineries on every street corner, and will probably ban any or all Lennie (used to be Leonard) de Caprio movies.
So what’s a poor OPECian to do with their production cut? I guess cut and run are the options.
The cuts won’t work so let’s just run production to the limit.
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