Global Economy and Energy Markets Weekly Commentary – 17th Feb ‘23

In this commentary to the Gulf Intelligence, Dr Carole Nakhle, CEO of Crystol Energy, discusses the latest macroeconomic developments and their implications on energy demand.

According to Dr. Nakhle, there’s still a lot of uncertainty and disagreement on the outlook for energy markets and this kind of disconnect between energy security and climate security and whether we have sufficient investment in general. On oil, people are still expecting volatility, spurred by geopolitics, macroeconomics, and the Chinese factor.

She added that Saudi Arabia is currently having a less optimistic outlook on the reopening of China. People should ask how fast Chinese growth is going to happen and when it’s going to hit the market. And it’s not just the China factor that will drive energy demand this year – what’s happening in other countries will also impact overall economic growth. The forecasts that were made by the IMF, World Bank and other international organizations towards the end of last year, have been revised upward, and that is a positive step but that does not mean that a recession will definitely be avoided or that there won’t be a slowdown in major economies. There’s also a war still raging in Ukraine and we don’t know how far Russia can go this year.

When asked whether Russia has already lost the war, Dr. Nakhle said that if Russia had lost the war, then we would have seen a much more aggressive reaction from them – they’re not going to just simply walk out. They might cause mayhem, perhaps in oil markets, even if it’s just going to be short lived. There is more concern about Russia being a nuclear power than anything else.

Dr. Nakhle finally added that inflation rates are still way above in previous years, thus  central banks, in major economies,  particularly in the US, haven’t completed the job yet. They still have some way to go, and it is unlikely achievable  in the short term.