PPROA Pipeline ~ July 2015
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Saudi cont’d from p. 1
The other principal geopolitical threat to the price of oil is Russia and Ukraine. While the conflict is seen in Europe
from the perspective of natural gas supply and dependence, the potential disruption to oil supply or Russian exports is
serious. Russian production is now well over 10 million barrels per day with exports at 75%.
Should the Minsk standoff agreement fail and military confrontation expand, the market perception would factor in a
war over resources with accidental events escalating into a NATO response via Eastern European members. Naval
interceptions of Russian crude oil would drive the financial services to speculative buying of oil. The West Texas Price
of oil would reach $100 per barrel before U.S. Government margin (deposits in the future markets) restrictions and
attempts at market containment.
The South China Sea is a new threat since it is the sea-route of Middle East oil to Asia. China is building an island-base
to defend its supply of oil imports. Vietnam in particular claims the same territory and has the capability to challenge
China. Gun-boat diplomacy or worse will be buy signals to oil traders from now on.
Geopolitical events such as these are short-lived. Physical supply and demand remains the long-term reality of the oil
exploration and production company.
The price war or market share OPEC alignment is against is the unconventional producers in the San Juan and Permian
Basin. They must have a rapid response capability in their corporate structure to capture momentary price surges based
on geopolitics through hedging. This is selling forward through derivatives and exchanges the in a geopolitically
induced upward price move. And this depends on timing in the hedging or financial departments which has