Analyst Christyan Malek is maintaining a bearish stance on oil following a recent visit to the Middle East, Nomura said in an informal note, seen by Wealth Manager.
‘The key message from the Kingdom of Saudi is that they will maintain production and tolerate low oil prices in order to drive (1) market share and (2) to drive Iran to regime change. To be clear, we believe this is all about Iran, and not about ‘hanging the US shale assets out to dry’,’ Nomura said.
What Nomura views as a Cold War between Saudi Arabia and Iran is the key reason behind their lower for longer thesis.
‘Saudi are also feeling the pinch of lower oil prices but foreign policy supersedes everything else right now, and it sounds like this view will hold for the next 12-18 months,’ the note said.
The analyst added that the oil price at $40 could potentially be tolerable. ‘Ultimately there will either have to be regime change in Iran and/or a new treaty,’ Nomura added.
The turning point will come when people take to the streets in Iran, the Japanese investment bank said.
