Oil to Be Hot Topic at Davos

Oil was a hot topic at the global elite’s annual gathering in Switzerland six years ago. It promises to take center stage again this week at the World Economic Forum in Davos.

Only this time, instead of debating how to find enough energy to power the global economy, executives and policymakers will grapple with a supply glut that is hurting producers and could fuel global deflation.

It’s been a remarkable reversal of fortunes. Back in January 2009, as Davos deliberated, President Obama was taking the oath of office, promising to reduce America’s dependency on foreign crude oil.

Fast forward to 2015 and U.S. shale producers are pumping nearly 4 million barrels a day, more oil than Iraq.

The U.S. energy boom is not the only factor behind the dramatic swing. Other producers, including OPEC, have been pumping away furiously, taking advantage of prices around $100 a barrel. Now the price has collapsed to below $50 as slowing global economic growth, energy efficiency and alternative sources sap demand.

Relief won’t come from OPEC any time soon, either, if Saudi Arabia and its Gulf neighbors have their way — and they usually do.

Saudi Arabia, which has long played the balancing role in world oil markets — pumping more when demand is strong, trimming supply when it slows — has had enough. It’s time for other producers, such as the U.S. and Russia, to do their bit, it says.

“We are not going to cut, certainly Saudi Arabia is not going to cut,” Saudi energy minister Ali Al-Naimi told CNN in a recent interview. The veteran minister went further, saying this was “the position we will hold forever, not [just] 2015.”

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza