Global Economy and Energy Markets Weekly Commentary – 4th Apr ‘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.

OPEC’s Q2 supply decision on 1st April was well orchestrated and not a surprise. It reflects the expected pace of economic recovery and oil demand post pandemic. By petering out their pre-announced cuts, they will get to the target of 5.8 million b/d by July, so we are on course, but with a seven-month delay to what had been planned last year. In addition, we have the flexibility of the Saudi one million barrels which can be used as a safety valve when needed and without any consultation – this discretionary tool was very smart policy.

In the meantime, India has threatened to turn away from Middle East oil producers. However, that is it’s just a transaction cost and not a fundamental change because that oil will just come from somewhere else. From a traders’ point of view, it would generate income possibilities and for those who produce, it triggers adjustments in oil flows, but for the outside market observer, it doesn’t cause any major ruckus in prices.

We will remain in a $60 to $65 target corridor until inventories and spare capacity are drawn down and normalised, with the path becoming less clear after that. The hope would be that demand and economic growth will be strong enough to accommodate any increase in production from the US and other parts of the world because they would be able to produce at these price levels.

Christof is joined by Mike Muller, Head, Vitol Asia. Sean Evers, Managing Partner at the Gulf Intelligence, moderates the discussion.

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