Global Economy and Energy Markets Weekly Commentary – 11th Feb ‘21

Dr Nakhle comments on the global oil market outlook for the remainder of Q1. She argues that, while the overall trajectory remains positive, demand is still uncertain given the subdued level of economic activity. She highlights that what OPEC+ decides to do from April will be a very important factor for oil prices. The market may be able to absorb the Saudi volumes back, but there are questions whether it can absorb a relaxation of other members’ output cuts.

Dr Nakhle further talks about the global economy – which is still in a shaky state, with the only exception of China – and how vulnerable the recovery is to monetary policy engagement. Whether stimulus spending will be sustained long term is a question on everybody’s mind as it cannot suddenly be withdrawn without serious fallout. Incidentally, the Saudis today also see themselves as the ‘central bankers’ of the oil market, taking a step- by-step approach in the absence of robust fundamentals that support a particular direction.

She also cautions that we still need to be aware of new problems such as these which may surface as the months progress, including the potential challenges to economic growth in countries where the virus has in fact been relatively under control, such as Australia and New Zealand. These countries are facing the unintended consequences of their success in managing the virus – a drop in migration and the labour force which usually drives their economies. Neither the global economy nor oil markets are out of the woods yet – they are still recovering from the deepest crisis of last year.

Dr Nakhle is joined by Andy Laven, COO, Sahara Energy Resources, and Peter McGuire, CEO, XM Australia. Sean Evers, Managing Partner, Gulf Intelligence, moderates the discussion.