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

In this commentary to the Gulf Intelligence, Dr Carole Nakhle, CEO of Crystol Energy, discusses the latest developments in global economy and oil industry.

Dr Nakhle comments on the recent oil price rally, which if maintained at this level, it is going to have an impact on global economies. The last thing needed during a fragile economic recovery is to be faced with higher commodity prices, especially if they jump quickly. That could put pressure on OPEC+, particularly the Saudis who have always played the role of central banker of oil markets.

Dr Nakhle also discusses whether higher oil prices would imply higher US shale oil production levels. While US shale companies have shown a discipline on committing to new investments, we must never underestimate a competitive market structure and the power of the private sector should the right incentives be provided. And in the US, the incentives are there from a government policy perspective, as well as price point of view. But putting supply aside, demand remains the biggest wildcard. Even if the virus gets under control, oil demand is not expected to go back to pre-Covid levels before at least 2023 and possibly beyond.

She further explains that while all eyes are on the disruptions in US production, what is ironic is that weather conditions – whether deep freezes or hurricanes – are not new challenges and are in any case short term. As such, we should also exercise caution when interpreting inventory drawdown figures – these are a moving target and not an entirely reliable indication of where the markets are heading because of constant changes in demand.

Dr Nakhle is joined by Rustin Edwards, Head, Fuel Oil Procurement, Euronav NV, and Amena Bakr, Deputy Bureau Chief, Energy Intelligence. Sean Evers, Managing Partner, Gulf Intelligence, moderates the discussion.