Necdet Pamir, one of Turkey’s foremost experts on energy, was recently asked about the latest crude oil developments regarding Saudi Arabia and Russia, and their seeming impasse.
Pamir believes that the Saudis were greedy to flood the market with oil, thinking they would be hitting two birds with one stone. The Russians, however, were quick to wake up to the game and double-bluffed them by not lowering their output. Saudis are trying hard to force Russia and Iran’s hand into submission.
Currently USA is the world’s top oil producer with 15.3 million barrels followed by Saudi Arabia’s 1.3 million production. Russia’s daily output is 11.4 million barrels while Iran’s is 4.7 million. When the prices go down, Russia, Iran and Venezuela are the first producers to suffer. Saudi Arabia is affected negatively as well, but they believe that Russian and Iranian economies are more prone to fail from such shocks compared to them.
Necdet Pamir is wary of the way the situation is developing. The Saudis are spending enormous amounts for the Yemen and Syrian wars. They are also financially supporting Egypt and Hafter as well, which makes them more vulnerable to economic turmoil.
As for Turkey’s situation in the midst of this unrest, Pamir has this to say: “Turkey will be positively affected by this. Both crude oil and natural gas prices are coming down. Of course, the prices have to remain low for a certain period of time for this to work. However, the 25% drop in oil prices in one day signals a worldwide recession approaching. IEA has predicted for the first time since 2008 that world energy demand may fall this year.”
Pamir also points to two other factors that have recently come into consideration: stock markets across the world are panic-ridden and are falling down hard. The United States markets had to utilize circuit breakers to avoid a market meltdown. The currencies of oil exporting countries are losing value. Coronavirus will undoubtedly have a truly negative influence on the economy. Turkey’s CDS rates have gone up by 150 points to 411 in 5 short days.
All in all, our current situation is too complicated to rely simply on oil prices. Necdet Pamir hopes we don’t end up with a compounded negative effect from all that is happening.