In 1886, the Liberal politician Joseph Chamberlain said: “In politics, there is no use in looking beyond the next fortnight.” In the 1960’s this was taken up by the British Prime Minister Harold Wilson’s: “A week is a long time in politics.” So, an update every sixty years ought to be expected and must come from President Donald Trump who, by his behaviour believes that 24 hours is more than enough time to either change one’s mind or change the political landscape.

One may never tell whether the US President’s posturing is an act or real indignation. But the Ukraine’s President rebuff of the Riyadh talks not including representation from the government of the land where war is taking place at the price of a million of its souls, sent the former US TV star into a fit of apoplectic pique and maybe he really is as thin-skinned as his detractors warn. At the start of last week the idea of talks pressured the oil market because any deal might see Russian barrels return from sanction, in the middle of the week prices rallied as Zelensky seemed to kibosh any US/Russian progress, and at the back of the week prices became weaker as Ukraine had little choice other than deploy more conciliatory language and could indeed agree to the mineral deal the US is demanding in return for warfare gifts. No matter interest rate decisions, inflation data, PMIs, a new potentially pandemic form of Coronavirus being found in China and oil inventory, oil prices were depressingly flat. Standing in evidence of the stasis is how M1 Brent futures settled $74.66, $74.74 and $74.43/barrel respectively for the last 3 weeks. There is plenty on the calendar for this week. The results of the German election, Eurozone Final CPI reading, German Ifo and GDP data, PBoC Medium Lending Facility Rate (MLF), Bank of Korea rate decision and the US PCE. The standout influence is likely to be darling Nvidia’s quarterly earnings on Wednesday, timed at 21.20GMT, and although whatever befalls the wider suite, if any swing ensues, oil prices will remain beholden to the bargaining over the future of Ukraine.

Deals are to be done by strong leaders. After WWII, Roosevelt, Stalin and Churchill thrashed out on how the most powerful countries were going to dominate and influence the world at the expense of the wishes of smaller economies and or militaries. Since then, multilateral influences of business, strategic cooperation, détente and the collapse of the Soviet Union have served the world to keep political figures, in charge of military potential from impeding a western narrative. In a recent interview with the BBC, Sir Alex Younger, the former head of the British Intelligence arm MI6 emphasised this point and on how the power void left was taken up by a ‘unipolar moment’ when the US’s global influence became almost unfettered, “It created globalisation and the world’s security infrastructure.” Since then, the US’s power has dwindled. Whatever the reason, there is a lack of will in being the world’s policeman, for good or ill. The US now experiences geopolitics where China is an ally to so many countries and incredibly Russia, which allies Syria, Iran and Saudi Arabia. The list of a changed diplomatic world and its intricacies are exhausting.

Referring back to Alex Younger, he believes that the ‘Yalta’ confluence of 3 strong men playing ‘Risk’ (the board game of global domination) with geopolitical land masses is about to be repeated by President Trump of the US, President Putin of Russia and President Xi of China. History repeats itself again with strong men and deals. Delving into how China might be empowered in its Taiwan intentions is rabbit hole best avoided, but if Ukraine’s sovereignty is bartered away as part of the tapestries which make up the ‘art of the deal’, then which piece of land and its millions of citizens will be next in sacrifice? Short, medium and long-term dynamics of such contemplation will dog oil price prediction and trading for some time to come.

More oil supply on the horizon

Oil prices this morning hold onto the losses experienced on Friday. The weighty words of instruction to find a solution from the US President find themselves entering the hiatus of Kurdish/Iraq pipeline supplies into Turkey’s Ceyhan. The wranglings of ownership at point of supply between Tukey and Iraq, the payments by Iraq to semi-autonomous Kurdistan and an existing arbitration ruling by the International Chamber of Commerce against Turkey eventually saw it shut the pipeline over 2 years ago. At the time, flows were nearly 450kbpd which if returned is a significant amount of almost-new crude. Current estimates, if the legal and financial sharing could be sorted, are that initial flows would be 185kbpd, not an overly large amount but enough to counter any push forward of OPEC+ for supply returns, but of course the greater capacity of previous flows would be expected to again be made good.

The interruption of some of the Kazakh oil supply from the Tengiz fields making its way to Russia via CPC pipeline because of last week’s drone attack have been pushed aside by the overall reporting of an increase in loadings. According to Reuters sources in Moscow, Black Sea CPC oil exports were revised up to 1.67mbpd for February from 1.42mbpd due to higher supplies from Kazakhstan. Even if repairs take a few weeks, there does seem to be a cushion of protection against the estimated loss of 380kbpd. With a possible resumption of oil via Ceyhan, an eased situation surrounding CPC and the idea of returning Russian barrels in any Ukraine war deal is giving a sobering opening to oil prices at the start of play this week.

Overnight Pricing