Global Economy and Energy Markets Weekly Commentary – 4th Feb ‘21

Dr Nakhle comments on the rising optimism following the positive news on the number of people vaccinated exceeding those affected by Covid-19 for the first time and on studies showing that some vaccines stop the transmission. However, she cautions that we should keep timeframes in perspective. While there is currently positive sentiment on improving demand and higher vaccine numbers, when we look beyond the mid-year point, the risk may be different. Structural damage to the global economy may have created some lasting problems that could come back with a vengeance in the coming years. 

Dr Nakhle also discusses the recovery in oil prices, with the Saudis taking a lot of the credit for the recent climb as compliance over the production cuts remains uneven between the countries, with some of them not delivering on their promises. Traditionally, Saudi Arabia has subsidised cheating members because they accept that is necessary to achieve a certain price target. Once they achieve that, they may ease production, but it will also depend on other reinforcing factors in the economy as well as the potential revival of the Iranian deal.

At the same time, OPEC+ will be keeping a very close eye on the potential return of shale at these prices. Despite the overwhelming pessimistic view about the outlook for shale, it continues to surprise on the upside. 

The positive rebounds in parts of the global economy have further lent support to the current market, especially in China and more recently in the US, where both employment and industrial activity have been improving. 

Dr Nakhle is joined by Dr Aldo Flores-Quiroga, Former Deputy Secretary of Energy for Hydrocarbons, Mexico’s Ministry of Energy, and Rustin Edwards, Head, Fuel Oil Procurement, Euronav NV. Sean Evers, Managing Partner, Gulf Intelligence, moderates the discussion.