On the North Sea Brent futures contracts traded on the London IPE and Chicago Merc, November was a lovely month for bulls. After all, as I write, Brent crude has risen from $58 in late October to nearly $64. As Opec’s ministers gather in Vienna for their conclave this week, headed by Prince Abdulaziz bin Salman, the wet oil market prices in a Saudi-brokered supply cut. The grapevine says that this month, after the Aramco IPO lists on the Tadawul on Wednesday, Saudi Arabia needs a Brent price above $70 to ensure that the biggest IPO ever seen in the history of the financial markets of the Kingdom is a blowout success.
The grapevine oil trading mutters that Saudi Arabia, the UAE, Russia, Kuwait and Iraq have agreed on increasing the size of the Opec+ from 1.2 million BPD to 1.8 million BPD and that Prince Abdulaziz and Russian Energy Minister Alexander Novak will advertise this at the press conference in Vienna. My global macro paradigm has one existential rule: never, ever, ever be caught short black gold (Brent or West Texas) when they want to raise the price of crude oil. There are also several compelling macro reasons why I’d stay with long Brent oil futures and even the pathetic loser, drop dead, zombie money oil and gas shares-the worst-performing industry of 2019 and the past decade, Wall Street’s Big Oil Cinderellas. Why? Five reasons for doing so.
One, a cut in Opec-Russian output for another 600,000 BPD will cause tightness in short-term distillate inventories as an Arctic winter hits North America (but fortunately not sunny, safe Dubai and Abu Dhabi where I’m home for National Day holidays that’s the column).
Four, I think Boris Johnson’s Tory Party will win the UK general election on December 12, putting pressure on the US dollar. For some of the coolest investors in the Gulf, my recommendation to buy sterling back in September at 1.20 for an initial 1.30 target has already made a big money/chump change. The best is yet to come if, on December 12, Boris (or the sceptred island electorate) renews his lease on his 10-bachelor pad on Downing Street. Jolly conditions on the ships. Although it may be cleverer for Harrow.