National Oil Companies Have a Bigger Seat at the Table
International oil companies aren’t the only ones that have power, according to Stuart Bradie, CEO of KBR, an engineering, procurement and construction company and guest panelist at the KeyBanc Capital Markets’ Industrials & Basic Materials Conference.
“National oil companies have it, too, because they’ve matured over time, so they now have a bigger seat at the table,” Bradie says. “Many of their economies are driven by oil, particularly in places like Saudi Arabia.”
Bradie believes this dynamic affords more opportunity downstream as national economies driven by oil start to diversify. Currently, there are strict lines between Saudi Arabia and Iran, he says.
“The Saudis are close with the U.S. and, to some extent, Israel,” he says. “The Iranians seem to be backed by the Russians. So there are scary fundamentals happening at a geopolitical level, and it’s playing itself out in Yemen and Syria and a bit in Gaza.”
If there’s greater volatility in the Middle East, oil prices will likely rise, but OPEC (the Organization of the Petroleum Exporting Countries) still has the ability to turn on the taps. When the price of oil rises, the taps turn on – supply increases and the price is lowered. When the price comes down, the taps are turned off – and the cycle begins again.
Bradie doesn’t believe oil prices will get to the high levels of the past, unless there’s huge volatility in the Middle East, and contends that levels should remain about where they are today, or maybe slightly higher.
“Many economies need that level of oil price to diversify and meet their obligations,” he notes. “The geopolitical piece is huge.”