Energy leaders are expected to have a busy week in Davos starting today early morning in Alpine resort. Many prominent officials have been confirmed to be attending including the IEA Chief, Fatih Birol, Chinese Energy Minister Zhang Jianhua, and Secretary General of OPEC Mohammad Bakindo. A meeting between the Energy Minister of Saudi Arabia Khalid Alfalih and his Russian counterpart has been expected to take place where they may discuss the current status of the oil market in which Saudi Arabia is contributing a cut of more than 0.3 million barrels along with Russia of more than 0.2 million barrels. However, the participation of the Saudi Energy Minster is still unconfirmed. The continued cooperation in the so-called OPEC+ is expected to form a major part of the agenda while proposing future actions for the upcoming extraordinary OPEC meeting to take place in Vienna in April 2019. The Davos meeting this year is happening at a good time for the oil market which is recovering after the OPEC cut decision by 1.2 million barrels made last December 2018. Prices are currently rebounding and the Brent is traded above $62 while the WTI is above $53 a barrel. Last year, the impact of OPEC-Non-OPEC agreement led to a jump in oil prices from less $40/bbl to above $60/bbl in 2018.
Last year meeting highlighted major key outcomes for the energy sector including; OPEC-Non-OPEC cooperation will continue throughout 2018 and beyond; and EVs alone will not lead to peak oil demand. Other issues of potential discussions, based on last year’s outcomes, may include decentralisation and digitalisation of future energy systems, the US departure from the Paris Agreement, and financing technologies for the energy transition. The World Economic Forum has set five energy-related sessions which are expected to hold important discussions; Strategic Energy Outlook, Energy Race, Realising Energy Transition, Climate Leadership, and the New Energy Equation. The Davos meeting this year is equally taking place at a time of critical uncertainty on issues including global energy demand, slowing economic growth in China, expected recession, and the expected increase in the interest rates by the US Federal Reserves. Furthermore, the increase of the US oil production to more than 11 million barrel, driven by shale oil, is expected to be on the agenda as its growth is expected to lead the US to be a net oil exporter in 2019.
Other topics on the Davos 2019 energy agenda will include climate change issues and the need for designing efficient carbon mechanisms and carbon incentive schemes. This will include establishing a climate-friendly tax and subsidy system including sharing financial risks among countries to mobilize private climate finance from the developed world to the developing world. Energy transition is also a major part of achieving climate targets. The Katowice Agreement struck in Poland this year will have a major impact on climate discussions this year. It will be important to analyze issues including acceleration in investment to renewable sources of energy while developing new sustainable policies for achieving global low carbon economies. The speed of countries and companies to adapt to the changing landscape of energy systems will be a major question in Davos 2019.