Dr Nakhle explains whether the US intention to release SPR crude will impact OPEC action, arguing that the announcement to release one million barrels a day for 180 days would be another factor that would give OPEC+ the strength to stick to their plan. Even before this announcement, OPEC+ was not warming up to the idea of putting more than 400,000 barrels a day in the market. The signals have continued that they are unlikely to deviate from this, although we expect to see the planned changes to quotas by the end of April. We are also hearing that there could be other members’ quotas adjusted but it won’t change the aggregate amount of oil that they want to put in the market for the time being.
She also comments on the Ukraine crisis and whether it is becoming an existential one for European economies. The possibility of Russia cutting its energy supplies to Europe cannot be entirely ruled out, even if it will hurt Russia more than its European customers. In terms of the gas rationing plans that we are seeing in Germany for example, the good news is that the winter season is over in Europe, though there will be some impact on industry. It will be interesting to see how Germany copes. This is an economy which has been quite aggressive in its push for climate change, asking households to have a certain percentage of their energy coming from renewable energy. Germany has also turned its back on nuclear energy. If the rationing does not work, what options will they be left with and will they prioritise energy security or climate security?
On the outlook for the global economy in H2 given US Fed tightening plans, Dr Nakhle adds that there is no going back for the Fed. It is becoming more determined than ever, but the US economy is doing much better than others. It can be more concerning about the developing countries which have their debt denominated in US dollars, in addition to rising energy, wheat and corn prices – all important commodities that they need. As for Europe, there has been more talk of recession in the past month and we will have to wait and see what happens. The good news is that if we head into a period of slower economic growth, that would ease the pressure on energy prices.
Dr Nakhle is joined by Tony Quinn, Operating Partner, Prostar Capital, and CEO, TankBank International, and Kate Dourian, FEI, MEES Contributing Editor & Non-Resident Fellow, the Arab Gulf States Institute in Washington. Sean Evers from Gulf Intelligence moderates the discussion.
Watch the full discussion:
“A brief history of the energy crisis: chaos, trial and much error“, Lord Howell, Mar 2022
“Energy Markets and the Design of Sanctions on Russia“, Christof Rühl, Mar 2022
“No endgame for Ukraine“, Christof Rühl, Feb 2022
“Global Economy and Energy Markets Weekly Commentary – 27th Mar ‘22“, Christof Rühl, Mar 2022
“Energy Market Dynamics“, Dr Carole Nakhle, Mar 2022
“The EU’s 4th round of sanctions on Russia“, Dr Carole Nakhle, Mar 2022
“Recent political developments in Ukraine“, Christof Rühl, Mar 2022
“Russia-Ukraine crisis and oil prices“, Dr Carole Nakhle, Mar 2022
“Can Europe decrease its reliance on Russian gas?“, Dr Carole Nakhle, Mar 2022