Oil winners-losers in small EM: pre-OPEC+, post ytd rally


After the 34% rally in oil price (Brent) since its end-December 2018 low and in advance of this weekend’s preliminary OPEC+ meeting (17-18 March), we briefly revisit data on macroeconomic exposure (net fuel import or export positions) and equity market performance in small Emerging markets.

The performance of Kazakhstan, Malaysia, Nigeria, Oman, Qatar (under-performing oil exporters) and Egypt, Kenya (out-performing oil importers) appear the most incongruous (when viewed through the lens of oil exposure alone). Among oil-related individual stocks, Dana Gas (Egypt, Iraq-KRI), Seplat (Nigeria), Sabic (Saudi) and PTT (Thailand) are notable under-performers relative to oil price, and Ecopetrol (Colombia), Gulf Keystone (Iraq-KRI), Medco Energi (Indonesia) are notable outperformers. See the charts below.

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Apart from the oil price increase, we highlight the following context for this preliminary OPEC+ meeting (the meeting involves a subset of the OPEC+ group, the Joint Ministerial Monitoring Committee which reviews the implementation of supply restraint and is intended to prepare the ground for the full meeting on 17-18 April).

Positive oil price:

  • OPEC+ is in the middle of a 1.2m bpd supply cut (this is supposed to last throughout 1H 19);
  • Modestly better global growth expectations following partial progress in US-China trade negotiations (although concerns persist on both US and China growth);
  • Venezuela security deterioration and a new round of US sanctions (partly offset by new Russian agreements);
  • Saudi public signals on its commitment to ongoing production restraint;
  • US government forecast cut for domestic oil output and data showing a drop in US crude inventories;
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Negative oil price:

  • Iran oil sanction exemptions have been granted by the US to a greater degree than perhaps initially expected (although these are due to expire in May);
  • Saudi has arguably shouldered a proportionately greater burden of supply restraint than Russia (which may portend differing levels of commitment to restraint in the medium-term).

Note that we do not make an oil price forecast (effectively, we assume that spot is the best guide to future price)

Oil-related equity performance in small Emerging Markets


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