Sharp-suited men in New York, spivs in the City, keyboard warriors in the Australian Outback, the whole global conspiracy of oil market speculators has been rebranded. No longer are they the spawn of the devil, but handmaiden to the achievement of what Opec secretary-general Mohammad Barkindo calls “our common goal of restoring market stability and reviving much needed investment”.
Norway’s state-controlled oil and gas company Statoil has been very creative in how it describes one of the most important issues in the industry. Its chief executive Eldar Saetre used an erotic romance novel reference last year, talking about 50 shades of sub-sea yellow. This time, Statoil top executives opted for computer terminology to make their point.
“As it is my last opportunity, the team were slightly concerned that I would do this off script. But sorry – I am going to stick to the script, because we are, of course, on record,” Shell’s outgoing chief financial officer (CFO) Simon Henry told journalists at the beginning of his presentation of the company’s financial results today.
The oil market has been fixated on Opec of late, with newly-loquacious oil ministers’ every utterance pored over.
But the exporter body isn’t the only organisation with a key role to play in balancing the market. The People’s Bank of China is Opec’s mirror on the demand side, and the producer countries will be hoping it is up to the task.
BP, in its Energy Outlook published this week, said that all of the demand growth for oil in next 20 years comes from emerging markets, with China accounting for half.
The Middle Kingdom is already a black hole for crude, with storage being built and filled while global prices are low. Aggregate crude imports, apparent demand and refinery runs all hit record levels in December.
US President Donald Trump’s immigration wall and nebulous border tax plans are sparking a Mexican backlash likely to find expression in the country’s oil patch. US companies have a lot at stake.
The abrupt souring of bilateral relations coincides with Mexico’s historic opening of upstream, midstream and downstream sectors that had long been the exclusive domain of state-run Pemex. The dismantling of the company’s monopoly was already a lot to swallow for Mexicans nurtured on resource nationalism that was embodied by their much-diminished national champion. Trump’s blunt words threaten to persuade Mexicans that this sweeping reform path, quietly encouraged by Washington, is a misguided route to submission, as interpreted by the country’s emboldened political parties on the left.
US oil companies and providers of oil services and supplies are invested in the Mexican reform process, imperfect as it is. A whole host of opportunities from pipelines to product imports suddenly became available after the landmark reform was passed in 2014, and US firms were among the best placed to compete.
Trump’s confrontational approach will not directly short-circuit the energy reform. But it is compounding pressure on Mexico’s unpopular president Enrique Pena Nieto to defend his country with short-term measures, and unleashing emotions that will color the way the process is rolled out as his opponents position themselves ahead of 2018 elections.
It may be too late to expect that Trump’s constituents in the US business community will soften the new president’s approach toward Mexico. Even if they do, Trump’s harsh words are already uniting Mexicans in a way that could haunt Washington long after the mercurial real estate tycoon returns to his gilded tower.