Global Economy and Energy Markets Weekly Commentary – 3rd Jun ‘21

We have finally broken through that stubborn ceiling but it’s too early to tell whether we’re going to stay in that range or push a bit higher. There is a major sentiment of optimism sweeping through everything. European and US travel is picking up and the recent OECD report on the economic outlook for the rest of the year shows upward revisions for almost all countries. It also highlights that many major economies, including the US, will hit pre-Covid income per capita levels before the end of 2021.

OPEC has said that it welcomes the return of Iranian oil to the market as long as it is done in an orderly and transparent way. Having visibility enables them to have greater control and they know that they will have to accept an increase in Iranian production and exports.

Countries like Brazil and India are still struggling with their economic recovery because Covid is not under control so higher prices of energy and other commodities are going to have a negative impact on their economic recovery path.

On whether economies that are recovering can absorb a $75/bl, there is a limit. We have had a demand shock and all eyes are still on demand. Economic growth will play a much more important role in the market than for example the return of Iranian oil, which will have a temporary impact. If prices heat up further and they are sustained, then we will definitely see a reversal of the growth and economic outlook everywhere, not just of emerging economies. But we’re not there yet.