Andy Critchlow, director of news for S&P Global Platts in Europe, the Middle East and Africa, described rising inflation and oil prices and their coincidence as a troubled moment in US President Joe Biden’s career, considering that the next Fed move is very important for energy prices.
In an interview with Al-Arabiya, Critchlow expected that oil prices would range between 70-80 dollars per barrel in 2022, referring to the estimates of S&P Global Platts, one of the experts, to the company’s expectations of supply and demand. He also explained that the equation of excess production capacity currently exists only in Saudi Arabia and the UAE.
He pointed to the level of inflation in the United States at 7%, to be a troubled moment recorded for the current US administration, especially in this critical period for the upcoming elections, explaining that Biden needs to strengthen his position, especially with the decline in his internal popularity recently, with inflation rising to these levels.
He considered that the rise in fuel, energy and gas prices increases the difficulties facing Biden. The nature of the move to be taken by the Federal Reserve (the US central bank).
He said that the Fed’s way of dealing with the current crisis with high inflation, its effects will not be confined to the United States only, but to all global markets, and of course it will be an important step for energy prices globally because the demand for oil depends mainly on the recovery of global economies, and therefore the change in monetary policy of the United States will be reflected on the liquidity that it Entering the market, which contributed to confronting the Corona pandemic.
raise interest
He described tightening monetary policies and neutralizing inflation by raising interest rates, as policies that will reflect on energy prices, and this is the most important question. Global demand is at 400,000 barrels per day at pre-pandemic levels, so we can simply say that the energy market this year will be the year of 100 million barrels per day or more.
And he considered that this is a positive thing for oil prices, so “our expectations for oil prices this year are to trade between 70 to 80 dollars a barrel, and we know that this expectation is somewhat conservative compared to the expectations of others, but there is a lot of uncertainty here, everyone knows the Fed’s tendency to raise interest rates.” Between three to four times this year, but we lack previous experiences similar to the current situation.”
He stressed that the banks’ positive outlook on the expected prices, especially when talking about prices above $100 a barrel, is motivated by the presence of high interest rates in the United States, which will be reflected on the economies of the OPEC and OPEC Plus countries, especially in the Gulf, and here we must remember that the Gulf economies are in Saudi Arabia. The UAE and Kuwait and their currencies are linked to the dollar, so the rise in US interest rates may affect inflation in the Gulf countries because it will limit the money supply at a time when these countries need to increase the money supply at the present time.