President Trump's as-yet-unspoken agenda in the upcoming meeting with Vladimir Putin in Helsinki could bring the following high-stakes diplomacy catalysts for crude oil prices and energy markets:
Future of Economic Sanctions Over Ukraine Intervention
Trump is likely to remain firm on Russia's economic sanctions issue as a political tool to leverage key issues for the United States, such as Russia-Saudi Arabia relationships on crude oil supply agreements, meddling with the U.S. elections and the future relationship of Russia with Ukraine and the European Union.
As we saw during the NATO summit, Trump's sour point on Russia is natural gas exports to Europe, where Gazprom is a big player. Putin may seek relief from Russian economic sanctions, which have prevented a company such as Exxon Mobil from carrying on its Russian arctic drilling program, partnership with Rosneft.
North Korea Support for Coal Black-Market Supply
Trump is likely to put pressure on Russia for facilitating black-market purchases of coal from North Korea. In regards to coal, Glencore is one of the large coal commodity traders with a strong presence Colombia, South Africa and Australia. Glencore was recently subpoenaed by the U.S. government on alleged FCPA (Foreign Corrupt Practices Act) violations in the Democratic Republic of Congo.
We'd remind investors that one of Glencore's largest shareholders is the Emirate of Qatar, currently taking a contentious stand against the rest of Gulf Cooperation Countries, which could add political pressure.
Russian Support of Assad
Trump is likely to pressure Russia to reduce Iran's presence in Syria. The U.S. has been backing opposition forces in Syria, while Russia has continued to support the current regime of Bashar al-Assad. If the talks during the summit are negative toward Syrian peace-making, it could lead to a bullish signal for crude oil, given the involvement of Russia and Iran, which both currently are under sanctions by the U.S. in OPEC+ supply agreements.
Our best Middle East E&P play is Genel Energy, which is a growing oil producer in Iraqi Kurdistan.
Iran Sanctions, a Bullish Sign for Crude Oil Prices
Iran has a weak position among OPEC members due its current economic sanctions from the U.S., adding uncertainty to the OPEC production balance and a potential bullish signal for crude oil prices. Iran currently exports 2.61 MM bbl/d to the world markets.
Our best crude oil tanker play is the John Fredriksen controlled Frontline, one of the largest crude oil tanker companies in the world. Iran's largest leverage is its unspoken control of the Strait of Hormuz, which is the pathway to all crude oil and LNG (liquefied natural gas) cargoes coming from the Middle East. However, the future of Iran's sanctions is a mixed catalyst for crude oil prices as Saudi Arabia is picking up additional production from countries including Iran and Venezuela, thus strengthening its position.
Russia-Saudi Arabia Collaboration on Crude Oil Price Stabilization
Exxon Mobil is the one of the oil majors with most exposure to Saudi Arabia's crude oil production, along with Halliburton. In addition, Exxon has a significant partnership with the Qatar for the development of its LNG.