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Global Economy and Energy Markets Weekly Commentary – 28th Mar ‘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.

On the Suez Canal blockage, Christof  Most of the oil which flows across Europe, the Middle East and Asia does not need the Suez Canal and Caspian oil mostly uses pipelines. Suez only accounts for 4% percent of water bound crude and 9% of total oil including refined products. The blockage will be costly and trigger some relocation of ships, but it can eventually be surmounted.

On the upcoming OPEC meeting this week, most likely the existing cuts will be rollover, but whether Saudi will retain its extra voluntary cut volumes is a question. While OPEC has been managing the situation by holding most of the spare capacity, countries such as China have piled up huge inventories that could counter any potential price spikes using some of these reserves. 

And we also have US shale capacity. OPEC has already started paying attention to shale again and this is really their ultimate dilemma. OPEC is placing a huge bet on demand recovery, but demand is fragile and prices are today high enough for shale to be economic. As such, the US rig count and production are expected to rise. To cancel that out, OPEC’s hammer will have to get bigger and bigger but it’s hard to know what its strategic end game will be. The US on its’ part is not really looking at OPEC anymore. The shale industry is being restructured and getting its finances in order, but shale is a technology and therefore it will never die. It’s just a matter of when and how it comes back.

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

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