Global Economy and Energy Markets Weekly Commentary – 4th Sep ‘23

Christof Rühl, member of the Advisory Board of Crystol Energy and a Senior Fellow at the Center on Global Energy Policy at Columbia University, discusses the latest global macroeconomic developments and energy markets in this interview to the Gulf Intelligence. 

Christof explains that the consensus has shifted towards the Fed being very close to one more rate hike in November or in January and then it could be done. But we should remember that four of the six percentage points decrease in inflation over a year, has been the result of lower gasoline prices feeding into the CPI consumer basket, so if the crude price increases now feed into gasoline, that could revive the entire debate on inflation in the US and what the Fed should or should not be doing. But generally, it’s still an economy that’s at a very high activity level- unemployment is very low, output is very high, and housing prices are going up.

He also remains very skeptical on China’s ability to revive its economy, short of a massive support program. It’s not managing the transition from industrialization to services very well so overall growth rates will continue to decelerate. What’s also interesting is the efficiency improvement in the US on the oil supply side – at the same time as the rig count has declined, production went up. These productivity improvements would mean that it’s likely to be less elastic in reacting to a decline in economic activity than we are used to because they have more headroom.

He added that the Saudis have incurred the cost of the initial cuts so far. They may rollover the cuts into October and say that Russia can carry half of those because of the problems that it is having with production. Saudi Arabia is sticking to its program of bringing prices up and Russia has realized that a 500,000 b/d cut and maybe another one, and a $10 increase in prices, is good for revenues.

Christof is joined by Mike Muller, Head of Vitol Asia. Sean Evers from Gulf Intelligence moderates the discussion.

Related Analysis

Oil market: Shifting expectations“, Dr Carole Nakhle, Jul 2023

Related Comments

China accounts for 70% of oil demand growth in 2023“, Dr Carole Nakhle, Aug 2023

IEA oil report, a slowdown in growth turning into a falling demand?“, Christof Rühl, Jun 2023

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