Entries for 'Oil'

We analyze the impact of a potential spike in oil prices on advanced and developing countries, as well as the global economy as whole. We find that the overall effect is much less severe than in previous oil shocks due to structural changes including the reduction in the intensity use of oil.

Oil prices have moderated, on the back of easing demand and improvements in supply. However, the range of uncertainty in the price of oil will remain significant throughout the rest of the year.

Growth in the nine MENA oil exporters will accelerate. The impact of tighter global financial conditions is expected to be limited. The combined current account and fiscal balances will remain in large surpluses. Risks to the outlook are well contained given the ample public foreign assets.

We expect oil prices to average $101/b in 2022 and $85/b in 2023. However, the range of uncertainty remains large, including the extent of production cuts in Russia and in major OPEC members, the impact of the G7 oil price cap, and the prospects of nuclear agreement with Iran.

China’s exports to Russia fell in March-May, as sanctions limited Russia’s ability to pay. China’s imports from Russia hit a record high in May, lifted by both growing volume and rising prices. We estimate that China has been paying spot price for Russian oil, but a discounted price recently.

The country has been in political paralysis without a new government and president since October 2021. We expect growth to accelerate to around 9% in 2022 supported by higher oil prices and production.

Sanctions on Russia combined with supply shortages elsewhere may keep oil prices elevated despite lower global demand. Higher global oil supply combined with weaker demand growth could stabilize the oil market in H2 2022 and in 2023

Growth will accelerate to 5.9% in 2022 supported by higher oil production and prices. The combined current account surplus is poised to surge to 16% of GDP and the fiscal surplus to 7% of GDP. Inflationary pressures remain relatively modest.

The war has increased downside risks to growth, raised inflationary pressure, and would lead to wider current account and fiscal deficits. Worsening external financing conditions have encouraged capital outflows and raised the financing needs.

The adverse effect of the latest surge in oil prices is likely to be much smaller than those arising from previous shocks. Advanced and emerging economies have substantially reduced the amount of oil used per unit of output.

High oil prices since end-2020 are largely driven by pervasive supply shortages from the lack of adequate investment. Current futures contracts point to Brent average oil prices of $73/bbl and $69/bbl in 2022 and 2023, respectively. 

The recent rise in oil prices is supported by the cut in global oil production and partial recovery in demand. We still expect Brent oil prices to average $40/b in 2020 and $45/b in 2020. Downside risks include poor OPEC+ compliance with the cuts and a continued global economic slowdown

Lower oil prices, dwindling production, and COVID-19 have undercut hopes for growth in 2020, and turned external and fiscal surpluses to deficits. The medium-term outlook depends primarily on oil price and production recovery, and the continued implementation of structural reforms.