Global Economy and Energy Markets Weekly Commentary – 18th Apr ‘21

Christof Rühl, member of the Advisory Board of Crystol Energy and a Senior Fellow at the Harvard Kennedy School and the Center on Global Energy Policy at Columbia University, discusses the latest global economic developments in this weekly interview to the Gulf Intelligence.

Very positive growth figures in the US and China this year will bring inflation. We’re already seeing that creeping into supply chains. Container rental rates will continue to rise for the next three months because they are completely maxed out and that could temporarily affect energy and create bottlenecks. We’re moving into an overheated situation in certain economies which is largely unknown – that’s the biggest concern. The U.S. economy has performed better than the Federal Reserve and others had expected but there’s still no desire to stop the stimulus. The wall of money is growing. The big question will be to figure out how to move assets through that and whether they can engineer a soft landing to this boom.

China’s 18% Q1 GDP number was just a baseline effect from low growth a year ago. China’s medium- term growth has slowed down substantially so we should be expecting GDP for the year to be closer to 6% than 8.5%. The country is also harboring a problem in its financial sector with its highly leveraged economy. Cleaning up the sector will mean a slowdown in expenditures and also partially higher interest rates. Having come out of Covid first, China is now facing some of the adjustment problems. It’s the US which will be the main locomotive for global economic recovery this year.

With respect to oil markets, we are seeing price movements within the $60 to $70 range. Nobody at this point really has the intent to push prices much higher and inventories are drawing down nicely. OPEC could increase supply a little, but the recovery is still in choppy waters despite an overall positive trajectory. We should expect that their next target will be to gradually bring down this massive spare capacity.

Christof is joined by Walter Simpson, Managing Director, CCED. Sean Evers, Managing Partner at the Gulf Intelligence, moderates the discussion.