Oil Price: insignificant decline will die down

 

oil inventories

Oil price may have fluctuated slightly this week, perhaps due to the anticipated disruption to production and distribution in the wake of Hurricane Delta.

The inventory data from EIA, US Energy Information Administration, meanwhile, shows that the downward trend continues, giving hope to investors that yet another crash like that happened in April this year is highly unlikely.

The oil producing nations have been severely hit by economic downturn, amplified by the Covid-19 pandemic. In these circumstances, the OPEC members cannot keep reducing production indefinitely just because they are under obligation to act in unison; it’s easier said than done.

On the other hand, the production cuts did not produce the desired outcome for the organisation.

In this context, the Saudis showed pragmatism by reducing the price of crude sold to Asia, a few weeks ago; it was a step in the right direction, as the region was not hurt as bad as Europe and America did during the pandemic.

Of course, investors aspire to see high oil price for obvious reasons. They can breathe a sigh of relief from the fact that prices may stabilize between $40 – 50 in the coming months, especially in the current precarious circumstances.

It may not be the ideal goal; nor is it the light end of the tunnel. It is, however, is a clear sign the economies are recovering at a steady pace.

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