BAKU, Azerbaijan, Sept.30
By Leman Zeynalova - Trend:
The further rise in oil price could drive the global economy into a recession, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS) told Trend.
Oil prices rose to a three-years high of $80 per barrel on September 28 and then slipped on September 29 after U.S. crude inventories rose by more than anticipated.
“The market is rife with uncertainty and is eagerly awaiting the decisions of the OPEC+ to be announced in early October. The drivers of the current price hike are both psychological and material. Energy crunches in Europe and China, entirely unrelated to oil supply, create anxiety about looming crisis which make investors jittery. In addition, stockpiling in anticipation of a harsh winter add to the demand upswing. The monetary uncertainty in the US having to do with the debt ceiling and Fed policies put downward pressure on the dollar, which in turn could drive prices higher. To make matters worse the Iranian nuclear talks are stuck and there is no sign of sanctions relief,” said Luft.
The expert noted that most factors indicate oil will go to $90/bbl in the coming weeks and months.
“I do not exclude the possibility of triple digit oil at some point in 2021. But this would not be reflective of the fundamentals of supply and demand. The market is sufficiently supplied and there are several options to increase supply first among them is OPEC's decision to reverse its supply contraction. A further rise in price could drive the global economy into a recession which no one needs or wants on top of a challenging pandemic recovery. I believe OPEC+ is likely to stick to an existing deal to add 400,000 bpd to its output for November but beyond that we can see an uptick provided that the African members Nigeria and Angola can pump more and meet their quota, which is far from certain. I expect US National Security Advisor Jake Sullivan's address the issue of supply during his visit to Saudi Arabia and UAE.”
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