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Ministry of Oil holds a virtual seminar of (World Economy Outlook 2021)

26-01-2021

During a virtual seminal titled “The World Economy and Crude Oil prices for 2021” which was organized by the Public Relations Department in the Ministry of Oil the previous day. Mohammend Al-Shatti predicated Kuwait oil prices will improve this year and increase to $60 per barrel, especially in the second half year. In which the world may see (spillover) from the corona pandemic and the vaccine being offered in every country. The $70-80 barrel orbit sort of comfort for the Arab Gulf State budgets interests, which primarily relies on the oil as a source of income. However, Al-Shatti emphasized the need to develop mechanisms to diversify the economy, ease the burden on Gulf budgets and immediate programs, especially with the unstable oil prices and exposure of a large stock to differ between political and health solutions. Al-Shatti mentioned that this year a world recovery with the expectation of corona vaccine in the world, especially in the second half of the year 2021. This means a shift in the global economy course, towards a high recovery at a rate of 4 percent helped by the government-guaranteed financial packages to support efforts to deal with the corona pandemic and support economic activity. The improvement of oil demand was noted with returning back to normal life at a better pace than it was in 2020, would support the recovery of the producer economies in general and in the Arab Gulf. It was noted that 2021 is the year of excellence and recovery in all fields, the coronavirus pandemic and reinvestment of the oil and gas industry and better relation between economic blocs in the world with the beginning of the new American administration. Al-Shatti mentioned, the initial estimates indicate that the world’s oil reserves fell by 2 million in December 2020 barrels per day, but the oil reserves are still high and represent 11 percent than last year. Therefore, OPEC’s decision and Saudi initiative further reduction is a milestone in providing a positive atmosphere in the oil markets by restricting supplies, encouraging oil reserves and changing prices in their structure. China’s market is considered an important paper in the total demand for oil as it represents from the market, which absorbs the product exports. The demand rate increased in 2018 by 540 thousand barrels per day, then in 2019, 470.000 barrels per day, but in 2020, 440.000 barrels a day were declined due to the corona pandemic and overall activity and movement in the world. Chinese oil demand returned at 13.33 million barrels a day. China is also an important market in terms of its crude oil imports from 10-11 million barrels a day and China’s need and growth continues to affect the oil markets. He said that, the Deutsche Bank expectations indicates among a number of consulting houses that the global demand for oil will recover in 2021, close to 6 million barrels per day to 96.9 million barrels per day, compared to 2019 which was 100 million barrels per day, meaning that the rate of global oil demand is recovering, but less than the level of 2019 which was close to 3.1 million barrels per day, also OPEC Plus commitment to its role in the efforts to balance the markets speeds up the pace of withdrawals from oil stocks, as the numbers of the demand and supply balance indicate that the world is witnessing by the end of 2021 withdrawals of 2 million barrels per day, which paves the way for the promotion of higher levels of prices, especially in the second half of the year. On January 2021, he mentioned to the OPEC Secretariat expects that the global demand for oil in 2021, will be close to 6 million barrels daily to 95.91 million barrels daily compared to 2019 which was 99.76 million barrels daily, meaning that the rate of global oil demand is recovering, but it is below the level of 2019 which was close to 3.85 million barrels daily. Al-Shatti mentioned to the Citi Bank that, he expects in his study that the oil prices will recover to $60 per barrel, since the second quarter of 2021 and may rise to 65 dollars a barrel. These are considered positive indicators that confirm the expected transformation in the oil market during 2021 based on an improvement in the fundamentals of the oil market. But despite the bank optimistic expectations, which are interested in the: economy, product, industry and investment, it sets a range in which it limits the movement of prices during the current year according to certain assumptions. He mentioned, that there are positive factors that may control oil prices and affect the balance of the market and raise prices to the level of $70 per barrel during the next stage which are: any interruption of production in oil-producing countries due to technical and political factors, or an additional voluntary reduction from Saudi Arabia, the first of the Gulf Cooperation Council countries, or a fast recovery than expected in demand, or the US administration enacting legislation limiting the increase in US oil production in line with environmental conditions. Al-Shatti said, regarding to the future chart of the oil market during the current year, that three scenarios can be seen, the base scenario which is based on reaching an effective treatment in mid-2021 and a recovery of the economy’s performance at rates exceeding 4 percent, also the new US administration which is working for better relations with countries of the world, cooperating under the roof of the World Trade Organization and interested in the agreements of Paris on climate. Overall, in this interest is the performance of the global economy and it increases in the industrial and economic activity and transportation, also support financial packages and the oil demand returns to recover significantly with the widespread use of the vaccine commercially in mid-2021. OPEC Plus is committed to the balance of the market and Saudi Arabia reduces its production by one million barrels per day during the months of February and March, and this reflects positively on stock withdrawals, the frequency of withdrawals from oil stocks in the world increases during 2021 and 2022. Surely, this atmosphere will reflect clearly in oil prices as the fundamentals of the oil market gradually, turn from a surplus to a deficit and this affect oil prices as they become in the state of the pakordishen to encourage withdrawals from oil stocks, bringing the rate in 2021 to $60 a barrel for Brent crude oil. As for the second scenario, it revolves around optimism that exceeds the base scenario which includes a wide and effective spread of a vaccine to treat the Corona virus, which has a significant positive impact on oil demand and the recovery of aviation movement at a faster rate than expected, which pushes oil prices to $70 a barrel in 2021. The last scenario, which represents a state of weakness through the spread of the second wave of Corona and the failure of Corona treatment, and failure to adhere to the OPEC Plus agreement, which means the continuation of the state of imbalance of demand and supply and pressures on oil prices to revolve around $ 45 a barrel, which affects supply, industry conditions, the economy, and the speed of recovery In the refining and aviation sector positive steps. Sheikha Tamader Khalid Al-Ahmed Al-Sabah Director of Public Relations and Information at the Ministry of Oil, said in an intervention during the hypothetical economic symposium entitled (Global Economic Outlook) that, the positive steps were taken by the Organization of Petroleum Exporting Countries and its allies from abroad (OPEC Plus) will support the upward trend of oil prices during first half of 2021. She also commended Saudi Arabia's decision, to reduce the voluntary production of one million barrels per day during the coming months of February and March, which is considered a gesture of goodwill that gave the oil market a great dose of optimism with the improvement of prices. She stated, that the availability of vaccines against the emerging corona virus (Covid-19) and the expansion of the world's countries in vaccinating their citizens would support the demand for raw materials again, which pushed prices to their peak in several months recently. In addition to other hopes related to the recovery of demand from the huge stimulus packages implemented by the United States of America, which would also support the rise in prices.