Global Economy and Energy Markets Weekly Commentary – 10 May ‘24

In this commentary to the Gulf Intelligence, Dr Carole Nakhle, CEO of Crystol Energy, assesses the policies of OPEC+ and the US fed in relation to oil markets in this interview with the Gulf Intelligence

According to Dr. Nakhle, The market has absorbed geopolitical risks without significant disruptions to oil supply. And despite OPEC+ cuts, there remains ample non-OPEC supply. Although we’re witnessing growth in demand, it’s not as substantial as initially anticipated, especially from China. Market fundamentals are reflecting these realities, with the considerable spare capacity mitigating geopolitical risk premiums, and that’s why prices are at current levels. The discussions only a few weeks ago, regarding $90 being a new price floor, have proven premature. While market fundamentals are gradually strengthening, they’re not robust enough to support such high prices.

This in terms suggests that OPEC and its allies have succeeded in stabilizing the market within the desired price range. However, when considering real prices adjusted for inflation, they fall below expectations for many OPEC members, hindering their economic targets, and the desire is there among some OPEC+ members to maintain prices above a certain threshold. Still, there is no rationale for them to change course and start cutting volumes. Whatever conditions they based their decision on, have not changed significantly to trigger a change in strategy.