‘Volatile’ markets forecast for 2023 triggered by war, energy crisis: S&P Global VC

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The war in Ukraine, a global energy crisis and high interest rates could trigger volatility in markets across the world in 2023, S&P Global Vice Chairman Daniel Yergin told Al Arabiya.

Although energy security is “back on the table” for all major economies according to Yergin, he added that “the era of a fairly free flowing global oil market has been replaced by this partitioned… fragmented global oil market.”

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Factors altering the existing market this year include sanctions hurting Russia’s exports of oil and natural gas following its invasion of Ukraine and import-dependent countries turning to the Gulf and other supplier to offset Russian cuts.

“Countries are working very hard to ensure that they have conventional [oil] supplies,” said Yergin. Parallelly, EU and US governments are stepping up legislation to boost the use of renewables, he added.

“Even as efforts are made to enhance energy security, people are also looking at it in terms of carbon footprint and being more efficient in the use of energy.”

When asked about the general air of tension around a looming recession linked to COVID-19 in China and the price of oil, Yergin said: “When we saw the beginning of the global oil crisis in the late summer and early autumn of 2021, the world was growing at 5.9 percent,” referring to the GDP.

“In 2023 I think the world will grow at 1.5 percent and perhaps lower; there are some indications. If China comes back, the market tightens,” he concluded.

Debate around the energy crisis at the time was linked to the OPEC+ decision to cut oil production by two million barrels from October.

OPEC+, the producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) plus allies including Russia, announced its new production target in October after weeks of lobbying by US officials against such a move.

The US accused Saudi Arabia of kowtowing to Moscow, which objects to a Western cap on the price of Russian oil in response to its invasion of Ukraine, although, the Saudi foreign ministry stressed the “purely economic context” of the oil cut.

OPEC+ members also issued statements of support, after the White House accused Saudi Arabia of coercing members into supporting the decision to cut oil production.

However, as Al Arabiya English reported last month based on a specialist report from the US, the cut in production was “the right call even if it was unpopular at the time.”

“Six weeks later, the shock of the Oct. 5 OPEC+ decision has worn off,” the report from consulting firm that specializes in oil reports said.

In a December OPEC report, the organization said that demand for oil globally will rise by 2.25 million barrels per day (bpd), or about 2.3 percent in 2023, after growth of 2.55 million bpd in 2022.

With comments reflecting the report, Yergin told Al Arabiya: “I think there’s very experienced people in the Saudi Ministry of Energy who have been through a number of [economic] cycles and knows what happens when the world economy slows, and interest rates go up and what is does to demand.”

“…I don’t think there is a long-range plan. I think it will be very responsive towards what’s actually happening in the marketplace,” he added.

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