CGTN Europe interviewed Christof Ruehl, Senior Fellow at Columbia University, Center on Global Energy Policy
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00:00Welcome back to Global Business Europe. Let's return now to the Middle East and oil prices are holding steady as markets evaluate that ceasefire between Israel and Hezbollah.
00:10It follows a dip on Tuesday before the announcement. Brent crude is currently around $72.75 a barrel.
00:19Let's talk to Christophe Roulle who is a senior research scholar at the Center for Global Energy Policy at New York's Columbia University.
00:26Christophe, welcome to the program, good to see you. So this ceasefire between Israel and Hezbollah seeming to be holding so far.
00:33Does this look like it could be a stabilizing influence on the market or is there more volatility in store?
00:40In the short term, it's certainly a bit of a stabilizing impact but it's not really significant because oil market participants, like everybody else as we just heard,
00:51are still trying to evaluate how durable this ceasefire is, how much of it is tactics and how much of it is real.
00:57In general, in oil markets, what we have seen for a long time now is a strong fundamental trend which at the beginning of this year was upwards,
01:06so prices tended to be stronger because of the situation of market fundamentals themselves and then fluctuations of $5 up and $5 down around it
01:15which were going in line with developments in the war theater of the Ukraine and also in the Middle East.
01:21And then over the summer, that stable trend was steady and the fluctuations again driven by geopolitics around it, same magnitude, $5 up, $5 down.
01:32Now the stable trend is downward pointing for reasons only to do with oil markets.
01:37And again, in that sense, we see a little bit of a downturn on stabilization as you said as a result of that ceasefire.
01:44But that's a short-term fluctuation, it's a long-term impact.
01:47People will have to wait whether it holds or not and whether it's just a preparation for opening another front towards Iran.
01:54So that's the price issue, but what about supply? What about countries that depend on oil that comes from the Middle East?
02:00Will this be good news for global energy security?
02:05There is worry, of course, of supply disruptions but one also has to clearly say that of the current parties to that ceasefire,
02:12neither Lebanon nor Israel is an oil exporter or producer.
02:16And so the fear circles around either tightened Iranian sanctions in the future or military conflict with Iran
02:24and then attacks against oil infrastructure in other countries by, say, non-state organizations.
02:31So that's the prime fear.
02:33I think what has in the background more influence currently is the situation in Ukraine
02:39and the fear that Ukraine might attack energy infrastructure of Russia and that that might have an impact on the supply situation.
02:46Something else that could potentially be weighing on the oil market,
02:49Donald Trump proposing tariffs on China, Canada and Mexico.
02:53How might the prospect of a possible trade war affect the oil market?
02:59In two ways. First of all, by directly having an impact on supplies.
03:03Mexico is an oil producer which would probably see an increase in its oil prices.
03:09Iran is an oil exporter of 3 million barrels per day, 3% of the global,
03:14which is under sanctions but got away recently with exporting it anyway.
03:19We should expect the U.S. to tighten this course there.
03:23And the second impact would be a negative impact on prices
03:26because if to the extent that a tariff war triggers slower economic growth,
03:32in particular in countries like China where oil demand is still growing,
03:35to that extent the oil market prices would be negatively impacted.
03:40So we have two countervailing effects and I think that on the mix, on balance,
03:45what is stronger will be the negative effect of a trade war if it comes to that.
03:49Sorry to interrupt you. I wanted to ask you about OPEC
03:52and how they factor all of this into their decision making when it comes to production quotas
03:57or restricting or otherwise the global oil supply.
04:02Yeah, they have a really complicated equation in front of them.
04:05And the answer is that their only way is to do two things,
04:10is to ensure that the organization, consisting of many countries
04:14and many non-OPEC countries also, that the organization remains unified
04:18and remains coherent in whatever they decide so that it will be executed.
04:23The other is they will have to take into account the longer term fundamentals
04:27in oil markets themselves, independent of the geopolitical calculations
04:31because the geopolitics are impossible to forecast at the moment.
04:35Oil market fundamentals, as I said earlier, are pretty clear.
04:39We are seeing a long term downward trend in oil prices
04:41simply because the world is awash in oil and there is no end in sight.
04:45OPEC has already cut OPEC Plus and still there is more supply coming online
04:49from places like Guyana, new places, from old places like Brazil and the US
04:54which are outside the influence of OPEC.
04:56And so in order to, they have to face a very tough choice.
05:00Either they allow for prices to become lower in the long term
05:04because of that supply glut or they cut some more
05:06and then of course they lose on the volume side.
05:09That's their prime concern.
05:10I don't think that they can afford spending much time
05:13on short term geopolitical swings.
05:15Christophe, great to talk to you today.
05:17Thank you for coming on the program.
05:18That's Christophe Roulle from the Center for Global Energy Policy.