Wall Street’s top oil watcher says there are three geopolitical headwinds that might be “coming to a head in October” — and they could have implications for oil markets.
The three risks come from uncertainty surrounding Iraq’s Kurdish region, the nuclear deal with Iran, and the ongoing crisis in Venezuela, according to RBC Capital Markets’ Helima Croft.
Here’s an outline of her arguments why those three regions are something oil watchers should keep an eye on:
- The Kurdistan region: Last week residents of the Kurdistan region in Iraq voted in a non-binding referendum on independence. It was “met with harsh rhetorical responses from opponents and is sparking fears of a substantial supply shut in,” according to Croft.
- The nuclear deal with Iran: US President Donald Trump called the Iran deal “one of the worst deals ever negotiated” and repeatedly vowed to rip up the agreement. “President Trump will have the opportunity to make good on his pledge to decertify Iran on October 15, a decision that could set in motion a process that could lead to Congress reinstating the extra-territorial sanctions that prohibited investment in Iran’s upstream sector and compelled countries to reduce their Iranian crude imports,” Croft said. “Even if Trump has an 11th hour change of heart, new sanctions for non-nuclear transgressions are likely looming and they could deep-six the deal.”
- Venezuela: The White House has previously said it could up economic pressure on Maduro’s government. “New US sanctions will undoubtedly make it more difficult for the national oil company, PDVSA, to maintain current levels and meet its debt obligations,” said Croft.
In short, geopolitical risks look like they might be coming back for some oil producers. And even if they manage to avoid “full-blown crises,” Croft argues they will continue to “face considerable turbulence.”
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