The International Energy Agency said on Tuesday that member states may consider in the future the possibility of releasing more strategic oil reserves in the markets, if the need arises, while continuing to monitor developments in energy markets.
The agency’s executive director, Fatih Birol, told reporters in Dublin, ahead of a meeting of European Union energy ministers: “We are closely following the markets, especially the markets for petroleum products, such as diesel and others,” adding that “if there is a need, we will of course discuss with the governments of member states to take the necessary steps.”
Birol declined to comment on proposals hinted at by French President Emmanuel Macron and others regarding the release of more strategic reserves with the aim of reducing oil prices.
The sell-off in euro zone bonds stopped on Tuesday, with yields falling from their highest levels in years, but remaining near high levels, on expectations that strong growth and rising energy costs will push global interest rates higher.
The 10-year German government bond yield, the euro zone's benchmark, fell by two basis points to 3.625 percent, after rising on Monday to 3.6526 percent, its highest level in 17 years. Bond yields move in the opposite direction to their prices, according to Reuters.
The benchmark yield in the euro zone recorded its first decline in six sessions, at a time when oil and gas prices are still the main driver of the bond market, amid fears that inflation caused by high energy costs will push the European Central Bank to continue raising interest rates.
European Central Bank President Christine Lagarde said that the bank believes that adopting a deliberate and calculated response is the most appropriate option to control inflation. She added that developments in the bond market, especially rising long-term yields, may lead to a slowdown in economic growth.
“We estimate that this means one or two additional increases in interest rates from this stage,” Danske Bank economist Olavi Kaskesaari said.
He added: “This also means that the European Central Bank is in no hurry to raise interest rates again, which reduces the possibility of the next increase in October.”
Financial markets are currently pricing in four additional interest rate increases, at a quarter of a percentage point for each increase, in addition to the two increases approved over the summer.
The two-year German bond yield, which is most sensitive to changes in the European Central Bank's interest rate expectations, also fell by about two basis points to 3.281 percent, after hitting its highest level in three years the previous day.
Saudi Arabia is heading into an economic phase in which geopolitical transformations intertwine with rapid developments in artificial intelligence, energy, and the labor market, at a time when the abundance of information does not necessarily mean ease of decision-making, with the increasing need to sort out variables and identify the most influential trends in the economy and investment.
At the opening of the first edition of the “Servcorp Economic Forum” in Riyadh on Tuesday, Walid Abu Khaled, Chairman of the Board of Directors of Emer for Emerging Markets Intelligence and Research, said that challenges will remain, but what is more important is how to deal with them and turn them into opportunities, pointing out that the challenges facing Saudi Arabia and the world today differ in nature from those that existed in previous decades.
Abu Khaled pointed out that the geopolitical developments related to Iran, the United States, and Israel, in addition to the security of the sea lanes in the Straits of Hormuz and Bab al-Mandab, highlight the importance of Saudi Arabia’s position in the global economic system, especially in the energy sector, describing the Kingdom as “the heart of the global economy” when it comes to energy that fuels the movement of the global economy.
In parallel, he said that artificial intelligence imposes a profound transformation on the labor market, with the acceleration of automation and the use of new technologies in the manufacturing, consulting and programming sectors, raising increasing questions about the jobs and skills that the economy will need in the future.
He pointed out that companies in the robotics sector are moving towards fully automated factories, while he pointed to the use of artificial intelligence in implementing a large proportion of consulting and programming work, considering that technical transformation affects various aspects of the economy, and makes issues of human capital and future skills a major part of the economic discussion.
Saudi Arabia and its global role
For his part, David Godchaux, CEO of the Middle East, Europe and America region at Servcorp, said that Saudi Arabia has witnessed a major transformation over the past 17 years, during which it moved from an emerging market to a major economy in the region, with its growing role at the global level.
He explained that the ease of obtaining information today does not mean that decision-making has become easier, as the amount of available information has increased significantly due to artificial intelligence, social media, and geopolitical developments, which has made the challenge represented in identifying valuable information from among this increasing quantity.
Godchaux added that the “signal to noise ratio” has declined, which increases the need for spaces that bring together business leaders, investors and policy makers to exchange information and read economic trends jointly, noting that the goal of the forum is to find “the signal in the midst of all this noise.”
According to Godchaux, the transformation witnessed by Saudi Arabia has made the economy more diversified, and energy is no longer the only driver of its importance, as the geographical location of the Kingdom and the network of paths that connect it to the rest of the world constitute additional factors that will increase in importance in the coming years.
Flexibility of capital in the face of transformations
Godchaux stressed that the upcoming opportunities require companies and investors to have a greater degree of flexibility and speed in directing capital, whether towards infrastructure projects or attracting the competencies and resources necessary for growth, stressing the importance of making decisions based on reliable and analyzable information.
The Servcorp Economic Forum, which brings together about 150 senior business leaders, investors and policymakers, focuses on the variables that are reshaping the economies of Saudi Arabia and the Middle East, North Africa and Turkey region, including artificial intelligence and productivity, energy and infrastructure, capital channeling, international trade, and the impact of technology on the labor market and future skills.
The forum comes at a time when Saudi Arabia continues to implement the goals of “Vision 2030”, while participants discuss economic transformations from a five-year perspective, with a focus on how to link global changes to the practical decisions of companies, investors and policy makers in the region.
