Dr Carole Nakhle, CEO of Crystol Energy, spoke at the 13th Global UAE Energy Forum hosted by Gulf Intelligence, discussing the outlook for commodities in the wake of peak inflation and peak rate tightening cycle in 2023.
Dr Nakhle talked about Russian sanctions, explaining that they have worked but they take time to impact. One weakness is that not everybody joined in, so the oil market responded by adjusting the direction of crude flows to big consumers like China, India, Turkey, and even some countries in the Middle East. However, the impact of sanctions on Russian oil products, coming up in February, is still a grey area. Countries like China and India have massive refining capacity – are they going to buy products from Russia? So, we should expect to see Russian crude production declining, maybe not severely, but even the most recent modest forecasts coming from OPEC show that it could decline by around 850,000 barrels a day and that could be because Russia is unable to redirect oil products as it did with crude.
She also discussed whether a global recession has been averted. There’s a dichotomy or disconnect between the financial community and what international organisations are saying about the state of the global economy. Wall Street is downplaying the outlook for recession and perhaps overplaying China’s comeback and its positive impact on the macroeconomic outlook globally for 2023, while the IMF and World Bank are predicting more doom and gloom. And no one knows how durable a recession will be if it happens. This is an indication of the level of uncertainty that we are still facing this year for all sectors, including energy.
On whether the commodities market has absorbed inflation and interest rate expectations, Dr Nakhle argued that there seems to be a greater belief today that central banks are going to relax their interest rates increases because inflation seems to be easing in key economies. But that is questionable because we might not have hit the peak of inflation and the Fed will continue until they have more definitive evidence that they have brought inflation down.
Dr Nakhle is joined by Ole Hansen, Head of Commodity Strategy, Saxo Bank, and Marc Ostwald, Chief Economist & Global Strategist, ADM Investor Services International. Dyala Sabbagh from the Gulf Intelligence moderated the discussion.
Watch the full discussion:
“Energy prices and inflation: Politics trump the economics“, Dr Carole Nakhle, Dec 2022
“Weather, Putin and Covid19“, Dr Carole Nakhle, Jan 2023
“Outlook for oil and gas markets for 2023“, Dr Carole Nakhle, Jan 2023