Geopolitical risk bearing down on global oil markets is increasingly taking hold and weighing on oil prices as Saudi Arabia and Iran jockey for influence and position in the Middle East. These concerns escalated just over a week ago when Saudi Arabia’s young Prince Mohammed bin Salman ramped up tough rhetoric over Iran, pledging to acquire nuclear weapons if indeed Iran develops them.
His muscular geopolitical approach in the Middle East and recent talks in Washington with President Trump, pledging to buy more U.S. military hardware, shows that Saudi foreign policy under his helm will be more aggressive, albeit with even more military punch – all factors that spook oil markets and tend to drive prices upward.
In fact, oil prices have already seemingly found a floor with both global-benchmarks Brent crude and NYMEX-traded West Texas Intermediate (WTI) crude prices trading in a low to mid $60s range for an extended period of time. However, given renewed geopolitical risk, that trading average could easily trend upward into the low to mid-$70s range.
All of this of course is not lost on oil and gas exploration and production (E&P) companies, who pulled back their endeavors, particularly more cost intensive offshore drilling actives, during the 2014-2016 global oil price crash.
Now, it seems offshore drilling, at least in some parts of the world, could be poised for a healthy comeback, particularly in the waters of Southeast Asia.