Sunday, June 16, 2024
 
 

Oil markets nervous after Tillerson sacked, McMaster on his way out

White House musical chairs fuels US get-tough stance fears

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The firing of US Secretary of State Rex Tillerson and if President Donald Trump removes H.R. McMaster as national security adviser could impact major hydrocarbon producers Iran, Saudi Arabia, and Russia, leading to a boost in crude oil prices.

“With Tillerson leaving and if McMaster is out as well, it’s looking like much more aggressive potential policies coming out of the United States and I think that considerably ups the nervousness throughout the energy market because the issues of Saudi Arabia and Iran will come under greater focus, the issues with Russia will come under greater focus so I see a risk premium being added to energy prices,” Justin Urquhart-Stewart, founder of London’s Seven Investment Management, told New Europe on March 16.

CIA Director Mike Pompeo, who was recently named secretary of state, has echoed Trump’s denouncing of the 2015 Iranian nuclear agreement between the US and other world powers. Tillerson, who was sacked on March13, had advocated for Washington to stick by the deal, which led to the lifting of most international sanctions against Iran in exchange for curbing its nuclear program. The deal has led to an increase in oil exports from the Islamic country.

“It looks as though the American policymakers, the teams are getting more hawkish and therefore I think this is going to put a lot of pressure on the Iranian deal and so it looks as though we might be heading to him refusing to renew it and that’s going to have consequences,” Urquhart-Stewart said.

“I think this may well push the oil prices up. It will be not necessarily on the basis of demand, just out of sheer nerves as to which way this erratic presidency is going because no one can trust what the policy is but it’s liable to be – judging by the movement of Tillerson – moving more to the right, to be more aggressive,” Urquhart-Stewart said, adding that will create a lack of confidence and could easily put a spike on oil prices over the next dew weeks.

Analysts wonder whether Israel might take a cue and adopt more provocative positions further increasing oil market jitters.

Regarding Russian energy supplies to Europe after the UK government announced a series of measures in response to Russia’s refusal to respond to the accusations of involvement in the poison attack against the ex-Russian spy Sergei Skripal and his daughter, and the US issued a new list of individuals and entities that are to be added to US sanctions, Urquhart-Stewart said, “the issue with Russia certainly that seems to haven’t had too much affect of yet mainly because we don’t actually know what the retaliation is going to be from Russia but so much LNG (liquefied natural gas) is swashing around at the moment but that could certainly cause concern throughout western Europe which are very dependent upon Russian gas.”

For the moment, despite the political risk, concerns that global crude supplies are rising led to a weekly decline in oil prices. According to Reuters, US West Texas Intermediate (WTI) crude futures remained unchanged at $61.19 a barrel on March 16. Brent crude futures dipped 11 cents to $65.01 a barrel, a 0.2 percent loss.

Asked if the former Exxon Mobil CEO could act as a mediator between the oil industry and the US Administration now that he left the top diplomatic post, Urquhart-Stewart reminded that Tillerson did not get on well with Trump. “I think he is just going to turn his back to Washington politics and go back to the world he knows,” he said. “He is going to be out of the picture now – just go back to the place where he is happiest, which is getting dirty in the oil business.”

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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