WEEKLY ENERGY RECAP: Is the price right for crude?

Azerbaijan's Energy Minister Parviz Shahbazov (R) and Saudi Arabia's Energy Minister Khalid al-Falih attend a press conference at the end of the 13th meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC and non-OPEC countries in Baku on March 18, 2019. (AFP)
Updated 07 April 2019

WEEKLY ENERGY RECAP: Is the price right for crude?

RIYADH: The big story of the week was Reuters reporting that Saudi Arabia was mulling selling its oil in currencies other than the dollar if Washington pushed ahead with legislation exposing OPEC to anti-trust prosecution.
The story, which cited unnamed sources, added further drama to a narrative that is hardly in need of any more twists and turns of plot.
Before getting too carried away, it is worth reflecting on the absolutely vital role that the Kingdom of Saudi Arabia plays in balancing global oil markets.
Saudi Arabia is one of the 20 most powerful economies in the world and that same world depends on it to ensure that the fuel that powers people’s cars and heats their homes is in steady supply.
It is hard to imagine a world without the Kingdom playing that vital role. Changing the pricing mechanism deployed to price oil is not so unusual.
After all China, which does not export crude oil but is the world’s largest crude oil importer, has launched its own oil pricing exchange as a clear direction to detach from dollar dominance in pricing crude.
The establishment of the Shanghai Energy Exchange was the first step in displacing the dollar in almost 10 percent of the global oil consumption.
Whether Saudi Arabia wishes to price crude in dollars or riyals is ultimately a matter for the government as it determines what is in the best economic interests of the country. In this there is no difference with other countries and other industries.
For example, car makers price their cars without referring to global benchmarks and without pressure from the media, speculators or money managers.
The debate around pricing should not deflect from the Kingdom’s pivotal role in balancing global oil markets. Attempts to criminalize OPEC through the US bill known as “NOPEC” threatens global energy security more than OPEC itself or indeed its largest producer.
The other big running story that has been moving global energy markets has been sanctions against Iran and the granting of import waivers. 
With Brent crude passing through the $70 mark, oil prices have gained almost 30 percent since the beginning of the year. This may encourage the administration of US President Donald Trump to grant waiver extensions for some major oil importers.
Looking at the current trajectory of prices, Brent crude may not be far off from reaching the mid-70’s mark by May amid a continuing supply deficit and further potential supply outages.
With this in mind, earlier predictions about an economic recession dampening demand for oil and refined products was completely wrong. It ignored market fundamentals and drove prices lower by failing to take account of seasonal demand, trade balances and rising refinery capacity.


IMF warns of Asia’s darkening growth outlook as trade war bites

Updated 18 October 2019

IMF warns of Asia’s darkening growth outlook as trade war bites

  • The IMF cut its economic growth forecast for the Asia-Pacific region to 5.0 percent for this year and 5.1 percent for 2020
  • It also slashed China’s growth forecast to 6.1 percent for this year and 5.8 percent for 2020
WASHINGTON: Asian nations face heightening risks to their economic outlooks as the US-China trade war and slumping Chinese demand hurt the world’s fastest-growing region, the International Monetary Fund said on Friday.
In its World Economic Outlook report on Tuesday, the IMF cut its economic growth forecast for the Asia-Pacific region to 5.0 percent for this year and 5.1 percent for 2020 — the slowest pace of expansion since the global financial crisis more than a decade ago.
“Headwinds from global policy uncertainty and growth deceleration in major trading partners are taking a toll on manufacturing, investment, trade, and growth,” Changyong Rhee, director of the IMF’s Asia and Pacific department, said during a news conference at the IMF and World Bank fall meetings.
“Risks are skewed to the downside,” he said, calling on policymakers in the region to focus on near-term fiscal and monetary policy steps to spur growth.
“The intensification in trade tensions between the US and China could further weigh on confidence and financial markets, thereby weakening trade, investment and growth,” he said.
A faster-than-expected slowdown in China’s economic growth could also generate negative spillovers in the region, as many Asian countries have supply chains closely tied to China, he added.
The IMF slashed China’s growth forecast to 6.1 percent for this year and 5.8 percent for 2020, pointing to the impact from the trade conflict and tighter regulation to address excess debt.