According to Dr. Nakhle, there’s a significant level of uncertainty. The economic outlook in the US does look very encouraging with data for the third quarter of 2023 GDP growth at nearly 5%, largely driven by consumer spending and despite the aggressive monetary policy of the last 18 months. Still, there are many question marks about where the economy will go next. The data on consumer expenditure during the summer shows that people have been drawing down significantly on savings, so we are now entering a new phase. Add to that the lagged effect of interest rates, yet to be felt, and the outlook might not look so rosy.
The pause by the European Central Bank (ECB) for now has been possible because inflation has dropped and there are also concerns about the slowing down of the eurozone economy. In the US, there could be room for one or two more hikes by the end of the year, but the big question is for how long they maintain those levels, because that will have an impact on the economic outlook.
When asked about the impact of Middle Eastern tensions on oil prices, Dr. Nakhle argued that the markets today are very different from ten or 15 years ago when, if the Middle East sneezed, the whole world would catch a cold. The geopolitical risk premium and fear of an escalation has dissipated compared to a week ago, but that does not mean things could not escalate. Other fundamental realities such as more non-OPEC supply coming to market,
spare capacity created by OPEC+ cuts, and the weaker global economic outlook, are keeping a lid on prices.
Regarding her assesment on European gas markets, she said that the continent is in a much better position than last year, primarily because they managed to diversify their gas supplies and they have full inventories of gas, which gives them a good safety cushion. Gas prices are well below the levels that we saw a year ago. But we don’t know what will happen in Asia, which in turn is going to impact demand for gas in Europe.
Dr Nakhle was joined by Dr. Aldo Flores-Quiroga, Senior Advisor at FTI Consulting, and Aditya Saraswat, Research Director, MENA, at Rystad Energy. Sean Evers from Gulf Intelligence moderates the discussion.
“Oil market: Shifting expectations” Dr Carole Nakhle, Jul 2023
“Europe deepens dependence on Qatari gas despite Gulf state’s Hamas links“, Dr Carole Nakhle, Oct 2023
“Oil markets react to rising geopolitical tensions“, Dr Carole Nakhle, Oct 2023
“Oil markets watchful amid Israel-Hamas war“, Dr Carole Nakhle, Oct 2023