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Saudi Oil Minister Expects Recession But Isn’t Worried About Oil Prices

A global recession is a possibility but it will hardly have a serious effect on the economy, Saudi Arabia’s top oil man, Khalid al-Falih, said at the Future Sustainability Summit taking place this week in Abu Dhabi.

“A lot of resilience has been built into the global economy through regulatory systems. Companies and governments have built better fiscal positions,” Al-Falih said as quoted by S&P Global Platts, adding “I’m not ruling out a cyclical recession, and there will be one sooner or later, but I don’t see it as a big shock to the global economy and I don’t see it spilling over into the global economy.”

Talk about the possibility of the world’s economy slipping into a recession this year has been intensifying over the last couple of months, with speculation about the United States and Germany in particular. This led Bank of America Merrill Lynch to issue an updated forecast for oil prices, noting that Brent could slide down to US$35 a barrel if the recession scenario materialized.

Al-Falih, however, is not worried. He noted that oil demand will remain robust this year and that any negative impact of an economic slowdown or even recession would be short-lived. The official also said OPEC is ready to deepen its production cuts should the need arise, to make sure whatever happens to the global economy does not result in a stronger effect on oil prices.

“On the supply side, we are vigilant to take appropriate response if there is an impact on demand,” he said. “If you look at the OPEC+ group, our combined production is close to 52 million. Adjusting by 5% does not appear to be a challenge.”

Al-Falih’s cool extends to renewables as well. The official told media he was not worried about renewables encroaching on oil territory, noting that efforts to tackle climate change needed to be focused on “managing carbon emissions, not promoting one energy source over another.” He added that renewables were only a threat to coal, which they would displace in power generation, but not to oil.