Crude and politics mingle as Saudi crown prince visits India, China
Trade and investment were the reported themes of Saudi Crown Prince Mohammed bin Salman recent visits to India and China, but it's probably more than coincidence that those two countries also happen to be the biggest buyers of Iranian crude oil.
Last week's trips to New Delhi and Beijing were centred on splashy trade announcements, including a $10 billion refining and petrochemical complex in China, and talk of $100 billion of deals in India.
If there was much analysis of the political implications of the visits it was more along the lines that the crown prince was polishing his image in the wake of the alleged murder of Jamal Khashoggi, a Washington Post columnist and critic of the Saudi government, at the Saudi consulate in Istanbul in October.
But it's also likely that crude oil was discussed between the crown prince and Indian Prime Minister Narendra Modi and Chinese President Xi Jinping.
China and India are the two key buyers of Iranian crude and are currently importing from the Islamic Republic under waivers granted by the administration of US President Donald Trump.
These waivers to eight of Iran's oil customers are due to expire in May, and the United States has indicated that it doesn't intend to extend them in order to ramp up pressure on Tehran to re-negotiate the deal to limit its nuclear programme.
It's here that the intersection of geopolitics and the crude oil market become interesting.
Saudi Arabia would like to curb the influence of Iran in the Middle East, while at the same time pursuing the often incompatible goals of keeping the mercurial US president on sides while maintaining relatively strong crude prices.
The Trump administration wants to isolate and pressure Iran, keep the Saudi Arabians as their key Middle East ally, but also keep crude prices relatively low so as to keep the voters happy and the US economy ticking along as the key 2020 presidential election creeps closer.
Throw in a side helping of US sanctions against Venezuela and some interesting dynamics emerge for the crude oil market, particularly as concerns supplies to India and China.
If the United States is successful in stopping, or severely curbing, exports from Venezuela and Iran, the refiners that will feel the most pain are those in Asia, particularly China and India.
This is because many of the refineries in those two countries are configured to process the heavy, sour crudes typically supplied by Iran and Venezuela.
It's far too simplistic to say that other oil exporters can make up any shortfall, as the type of crude that could be added to global supplies rapidly is likely to be more of the light, sweet grades, such as US shale oil.