Takeaway: Former OPEC President and Hedgeye analyst Joe McMonigle discussed next steps in the oil price war and potential off-ramps


Replay | Energy Policy: Oil Price War

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During a conference call with clients last week, former OPEC President and former Algerian energy minister Chakib Khelil and Hedgeye's Energy Analyst Joe McMonigle discussed next steps in the oil price war between Saudi Arabia and Russia as well as potential off-ramps in the near-term.

McMonigle and Khelil agreed that the price war is likely resolved in the second quarter and explain why the consensus view that the price war continues through the end of the year is untenable.

In the near term, McMonigle and Khelil agreed oil prices are likely to fall further into the teens with massive demand declines and rising stockpiles. While any possible OPEC and Russia agreement on future production cuts would not result in pre-March prices, they argue it will be helpful to bring some stability to oil markets that currently have no catalyst or condition for a price floor.

The brutal oil price war that started after the collapse of the OPEC+ talks in Vienna on March 6 may be subsiding amid recent notable signs from Russia, Saudi Arabia and now possible Trump intervention conveyed last week.

Trump commented on the oil price war during one of his COVID19 press conferences last week and took a significant pivot on oil prices from cheering lower oil prices to concern about US energy jobs losses and “hurting a great industry.” 

In his comments on energy, Trump said “we are trying to find some kind of medium ground” adding that he “spoke to numerous people who have a lot to do with it and we have a lot of power over the situation.” Trump concluded his comments by saying “at the appropriate time, I’ll get involved.”