UPWARD MOMENTUM
THE ringgit hit an 18-month high yesterday, buoyed by growing confidence in Malaysia’s economy and the weaker US dollar.
KUALA LUMPUR: The global oil price is expected to be trading at between US$60 and US$87 (RM238.20 and RM345.39) a barrel this year, attributed to geopolitical risk, higher demand in oil and gas and the weaker US dollar.
International benchmark Brent crude oil hit a fresh high of US$69.28 a barrel yesterday. The contract broke above US$70 on Thursday for the first time since December 2014.
IQI Global chief economist Shan Saeed said the global demand for oil and gas was likely to hit 98 million barrels a day in the third quarter of this year on the back of improved business activities.
Three years ago, the global demand for oil and gas was at 93 million barrels a day.
“Developed and emerging markets in Asia and Asean are improving, which requires them to increase the energy demand to further drive their businesses.
“Countries like China, South Korea and Japan contribute about 57 per cent to global export of liquefied natural gas (LNG),” he told NST Business yesterday.
Shan said the cold weather in North America is raising demand for oil and gas, citing that the changing weather patterns are making energy more expensive.
Shan said the improved oil prices would also trigger O&G players to adjust their capital expenditure (capex), mainly in human resources recruitment and O&G exploration expansion activities.
“Many companies did not realise that oil prices will go up. Previously, a lot of workers have been laid off. Now, these companies would want to keep up the sustenance levels on improving oil prices,” he added.
Shan said the tense political situation in the Gulf region such as the conflict between Saudi Arabia and Yemen and the recent US declaration of Jerusalem as Israel’s capital have put the region’s stability in jeopardy.
“Geopolitical risk in the Middle East is likely to affect the production and supply of O&G as the region produces about 40 per cent of global oil production,” he said.
He said the diplomatic row between Pyongyang and Washington would also impact global oil and gas production and supply, citing that the US is a global oil producer.
“The relationship between the US and North Korea was heading for a quagmire, which requires diplomatic brinkmanship,” he said.
Shan said the US economy was still struggling to keep up a three per cent growth in gross domestic product (GDP) due to the productivity issue.
“Technology is making huge impact across all industries, including O&G, manufacturing, service, medical and legal profession in order to stay relevant and increase productivity.
“Thirty per cent of Americans are jobless as the economy is moving towards robotic and automation as well as artificial intelligence which is reducing human workforce.
“Technology is providing opportunities to move ahead faster in terms of economic growth for many tech savvy countries,” he said.
Hence, he said the US President Donald Trump decided to keep the dollar weaker in shortterm to rejuvenate the economy.
Meanwhile, he said Malaysia’s economy is moving ahead to become the 25th largest economy with GDP hovering around US$1.5 trillion by 2030, surpassing Singapore. Ayisy Yusof