(MENAFN- Gulf Times) The outlook for China's economic growth, which is experiencing its worst performance in decades, is the trigger of greatest uncertainty in the global energy markets, according to 32% of respondents in a Gulf Intelligence Survey conducted with 200 industry professionals.
Even at the Chinese government's targeted growth rate of 7% for this year, China's economy is heading for its slowest annual expansion in a quarter of a century. Producer prices slumped 5.4% in July, credit to the real economy plunged and consumer inflation remains at about half the target of 3% this year. Though many analysts believe the Chinese government is exaggerating current growth rates, an independent analysis claims they are closer to 6%.
After years of stability above $100 a barrel, Brent crude oil lost half its value in the second half of 2014, followed by a 50% rally, which ran out of steam over the summer and shed most of its gains. The uncertain outlook has triggered the cancellation of many projects, jeopardising much-needed investment in long-term oil production capacity.
"We know that there will be an end point to the uncertainty as oil markets will balance again when increase in global demand is large enough to offset growth in supply," Christof Rühl, Global head (Research), Abu Dhabi Investment Authority, said in reaction to the Survey results.
"It is important to understand the transition of the Chinese economy is what China terms as the rebalancing of the economy away from industrial sector towards more service sector and more light economic activity," he said.
Top energy industry officials and executives from the Gulf's national oil companies, including ADNOC, ENOC and KPC, alongside their international peers from Vitol, Gulf Petrochem, Socar Aurora, the Dubai Mercantile Exchange and Platts participated in the industry survey conducted by Gulf Intelligence Research recently.
Brent crude oil prices are expected to continue to experience dramatic swings through 2016, according to 56% of the survey respondents, with Brent crude expected to average in the $50 range according to 42% of the respondents, while 24% were more optimistic in their outlook with forecast for oil prices to average in the $60 range.
"Despite the North American oil rig count falling over the last year, technological improvements have exceeded expectations to keep shale oil production steady if not in a state of constant increase," said ADIA's Rühl.
"As oil prices started declining in the face of incremental supplies from the US, it was only rational for Opec not to cut production," he said.
The Organisation of Petroleum Exporting Countries decided last November to abandon its traditional role of curtailing supply to maximise price, and instead chose to maximise production to protect market share. The uncertain commitment by the oil exporters group to maintain this strategy is the main cause of volatility in the oil markets, according to 31% of the survey respondents.
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