From Casey's Energy Opportunities:
November's been a busy month so far for national oil companies. Take Saudi Aramco, the national oil corporation of the Saudis, which announced it's changing its price benchmark from West Texas Intermediate (WTI) to the Argus Sour Crude Index (ASCI). The switch will kick in for sales to the United States come January.
On the surface, Saudi Aramco simply made a practical move. The ASCI is closer to the price of international oil than WTI, which has been depressed by high U.S. inventory. The implications reach much farther, however. The Saudis' announcement marks a paradigm shift in how oil is traded around the world, and it signals that future supply and demand may well be in the hands of non-U.S. entities.
This trend is showing up in the banking side of oil and gas as well. For example, Petrobras, the state oil company for Brazil, just announced it completed a US$10 billion financing with the China Development Bank, inking a deal that will strengthen bonds between the two energy players.
Such developments often don’t show up in mainstream news, which tends to focus on the likes of ExxonMobil, Chevron, BP, and other "supermajor" oil companies. It would surprise many to learn that the top national oil corporations combined control more than twice as much of the world’s oil production as the supermajors (30% vs. 13%), and hold over ten times more in reserves (44% vs. 3%).
And many of the national oil companies are increasingly unfriendly to the United States. PDVSA of Venezuela is looking east for allies; China and its CNPC are pulling hard to outmaneuver U.S. energy companies in Africa; NIOC of anti-America Iran is slowly regaining position; and Russia's Gazprom is always just an argument away from turning off the natural gas supply of Europe, some of United States' top allies.
The United States disregards these vast regions of the fuel picture at peril of its energy security. Investors ignore them at risk of their investments.
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