Global Economy and Energy Markets Weekly Commentary – 24th Jun ‘21

Dr Nakhle comments on the Iranian nucleal talks arguing that it was unrealistic to expect a deal before the Iranian presidential elections. Negotiations continue. US President Joe Biden has to show to his people that he is getting something in return from the deal. Iran’s dire economic conditions act in favour of a deal. This, however, is not going to be a smooth ride.

Dr Nakhle further discusses the return of the US shale oil, mentioning that there is a shift in strategy, but it also depends on the timeframe we are considering. However, the word ‘return’ is inaccurate; after all, the US is still the largest oil producer in the world and has taken market share from other producers, including from OPEC itself. US shale producers are private entrepreneurs, guided by making profit and they may be cautious because they want to convince investors that they are more disciplined today. 

She also added that we should not look at oil prices in isolation from the general commodities trend where there is a sugar rush almost everywhere. 

Saudi Arabia has been pretty consistent for the last few decades: as producers, they of course favour high oil prices, but they know that high prices can be detrimental especially under today’s economic circumstances. The Saudis don’t want to kill the goose that lays the golden egg. This has been their strategy for many years and they are not going to change it in this delicate and critical moment.