Geopolitics Always Important Driver of Commodity Prices

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author)

In this week’s preview of what to watch in oil and gas markets, Rigzone’s regular energy prognosticators look at the places to keep an eye on geopolitically, colder temperatures in the U.S., attempts to hit $85 per barrel and more. Read on below to find out the specifics.

Rigzone: What developments/trends will you be on the lookout for this week?

Jon Donnel, Managing Director, B. Riley Advisory Services: Geopolitics are always important drivers of commodity prices and there are plenty of places to keep an eye on these days. There was rioting in OPEC+ member Kazakhstan last week in response to higher LNG prices resulting in dozens of deaths, thousands of arrests, and a new cap on fuel prices. A “temporary adjustment” was made to production at the country’s largest oilfield (Tengiz) where Chevron is majority shareholder of the JV operator. Tensions are escalating as Russian troops have amassed on the Ukraine border and U.S. and German diplomats have threatened major economic sanctions would result from an invasion.

Negotiations for the U.S. and Iran to return to the JCPOA nuclear plan took a positive step last week and could set the stage for incremental supply to be allowed back on the market if talks progress from here. Natural gas and electricity prices in Europe have eased from recent historic highs but are still well above typical levels and causing knock-on effects in multiple industries that directly impact consumers. Supply/demand fundamentals suggest firm footing for the commodity, but these situations could all add to short-term volatility in prices.

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: It has yet to be seen if Kazakhstan’s oil production will be impacted and the market could face a severe reversal should that not occur. Meanwhile, colder temperatures and snow have hit large sections of the U.S. creating more demand for heating oil and natural gas.

Barani Krishnan, Senior Commodities Analyst at investing.com: Attempts by bulls to reach the $85 per barrel mark last seen in October as all semblance of market rationality gets replaced by irrational exuberance.

To contact the author, email andreas.exarheas@rigzone.com