Photo: Arabia Monitor
The gloomy demand outlook is clouding chances of a strong oil market recovery this year, a bleak outlook backed up by OPEC+ members recently warning that demand was returning to the market slower than initially expected, and that a resurgence of COVID-19 infection cases could delay the rebound into 2021. This time is it lower for longer for oil markets.
The nature of the current crisis has profound consequences on oil-exporting economies in the region, particularly as mounting fiscal pressures and rising inflation will soon start to increase strains on dollar pegs across the GCC. One implication is that Saudi Arabia may reconsider its oil policy and lapse back into efforts to regain market share.
Earlier in August, the historic peace deal between the UAE and Israel — a ‘win-win’ situation for the UAE that delays the looming threat of Israeli annexation in the West Bank — is expected to alter the geopolitics of the region. Strategically, the deal formalises implicit regional alliances, as Israel and GCC states band together against Iran’s influence in the region. Although others may follow the UAE’s lead, we do not expect the deal to contribute to a wider peace, particularly as Palestinian grievances have been side-lined, not healed. History exhibits other cases of fallen two-state solutions, and ensuing implications from slugging it out, one-state-fits-all. They are long and painful, with no clear winner except demography.
This month, we also discuss the exacerbating economic crisis in Lebanon, which has worsened after the ammonium nitrate explosion that levelled parts of Beirut. Despite the cabinet resigning, a full overhaul is needed or the country risks slipping back into another sectarian conflict. We expect the struggle to secure international financing to continue. Meanwhile in Iraq, we analyse the growing ties with the US as new energy contracts are forged. We expect continued and increased GCC engagement with Baghdad.
We also provide insights on Oman, Egypt, Tunisia, and Algeria, and as always, updates on Sino-MENA developments. Our Energy Outlook forecasts prices lower for longer, with a range between USD 40-60 pb in 2021. The market continues to be oversupplied for now.
Dr Florence Eid-Oakden will be joining the ONS 2020 Digital conference on Monday 31st August at 14:50 CEST.
ONS, short for Offshore North Sea, was created as a meeting place for companies in the energy industry after oil and gas was discovered in the North Sea. The ONS Foundation partners with prominent organisations to facilitate global events and network meetings. The goal is to exchange ideas, learn and build relationships between industry, government and society.
All content is free of access and open for everyone on the front page at www.ons.no