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.
It seems to be on the front foot of Biden’s objectives and on the Iranian side, resistance to a deal is also crumbling. But what will make a real difference to market fundamentals is the return of US shale, and at these prices, it’s just a matter of time. Other bearish pressures on the market have been questions on whether global demand can absorb OPEC spare capacity and the fact that we have uneven vaccination and economic recovery around the world.
On the outlook for the US economy, we’re going to see inflation rates ticking up. US house prices are going through the roof, with a 20% year on year increase in median house prices and low supply. The Fed has started talking about tapering stimulus and it may be forced to intervene faster than most people thought. Whether that is fast enough to give the economy a soft landing or not is in question. As long as the money flows, we will see an increase of market volatility with people buying the dips. That will continue until we see firm data on inflation, after which it’s likely we will see a big adjustment by the Fed.
Christof further discussed whether Chinese demand is still the anchor for OPEC oil. OPEC and its partners have a dual task. They’re probably facing a less stellar recovery than was hoped for and so will have to manage output releases in such a way that the prices remain stable while the market returns to normal over a much longer period of time than they have envisaged. We should also bear in mind that OPEC compliance has been entirely due to extra cuts that the Saudis have implemented. Other countries have been 90% compliant, which is good by historical standards, but Russia has continued to violate rules. So, we do have a question around stability within the alliance with Russia moving one way and the Saudis the other.
Christof is joined by Maleeha Bengali, Founder, MB commodities. Sean Evers, Managing Partner at the Gulf Intelligence, moderates the discussion.
Watch the full discussion:
“Oil Intensity: The curious relationship between oil and GDP“, Christof Rühl and Tit Erker, May 2021
“US energy policy: Clinging to old tracks“, Dr Carole Nakhle, May 2021
“Global Economy and Energy Markets Weekly Commentary – 20th May ‘21“, Dr Carole Nakhle, May 2021