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

In this commentary to the Gulf IntelligenceDr 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.

Dr Carole Nakhle assesses the policies of OPEC+ and the US fed in relation to oil markets in this interview with the Gulf Intelligence

Dr. Nakhle then assessed how oil markets view US Fed policy as we move into the second half of 2024. The sentiment surrounding interest rate cuts has fluctuated significantly and done a 180 degree turn since the start of year. Initial expectations for rate cuts in Q2 have given way to discussions about potential increases. The Fed remains cautious, emphasizing the need for studying consistent data before altering its course. What we are noticing is a divergence
between European and US central banks, which suggests a potential shift in monetary policy dynamics in the future.

Dr Nakhle was joined by James McCallum, CEO and Chairman of Xergy, and Amena Bakr, Senior Research Analyst, Energy Intelligence. Sean Evers from Gulf Intelligence moderated the discussion.

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