Demand has been downgraded by the IEA and EIA by 300, 000 b/d and 400, 000 b/d respectively, compared to last month's forecast. The supply side looks rather balanced.
As for geopolitics, there are no major new tensions – Ukraine, Gaza and Yemen have already been factored into prices. And even though everyone is calling the talks between Iran and the US positive, it's unlikely an agreement will materialize within weeks.
How concerned might GCC countries be about weaker oil prices?
Countries like Saudi Arabia can afford to run a deficit, though not forever. They can also borrow. Some mega-projects are slowing down or shrinking from their original models, but if you talk to Saudi officials, they’ll say these are long-term projects, and not immediate concerns. The bigger problem has been attracting foreign direct investment, which has been slower than they expected.. Elsewhere, Oman is doing relatively well, and the UAE continues to see enough growth. Bahrain and Kuwait are more strained. Kuwait recently passed a law to allow government borrowing, that tells you a lot about their financial situation. The bigger risk to the region is geopolitical. If something major happens between Israel and Iran, or the US and Iran, you could see a flight of capital and a hit to the region's image as a safe place for business.
How do you interpret the recent meeting between Saudi and Iran?
If you go back to when the JCPOA was first agreed, the Gulf states were against it because they thought it gave Iran a free hand to enrich uranium and expand its nuclear program.
But now things have changed. The relationship has shifted, partly thanks to Chinese mediation. Saudi is probably trying to encourage Iran to do a deal with the US and also offering reassurances, such as pledging not to allow flights through their airspace for attacks on Iran, in addition perhaps to promises of economic or diplomatic support. Iran’s economy is struggling, and its regional proxies have been weakened. The Gulf countries don't want an attack on Iran - because of the risk of economic, political and nuclear fallout.