Oil price shows remakable resilience despite negative factors

vaccination hopes

Despite the usual negative factors weighing heavily on the price of crude oil, we haven’t seen a price crash, forecast by some analysts in the energy realm.

The OPEC+ - at least some members – have second thoughts about the production cuts; the US oil inventories have increased, according to the EIA, the Energy Information Administration; the US and most of the Western Europe are on the brink of yet another major lockdown; oil demand, even in Asia where it used to remain relatively strong, has weakened recently; there are hopes that Iran and the US will start talking again with the former making preparations for oil export in the near future; the demand for jet fuel shows no sign of recovering.

In short, the supply side of the equation, in all probability, is going to go up while demand may remain at the current level – at least, up until the spring, next year.

Of course, Brent crude hit above $50.00 recently, before falling back; WTI has been rising too. The prices remain above $40.00 at present.

It looks like that the hope of effective vaccines keeps the sentiments in the oil markets buoyant despite the universal anxiety over the spread of Coronavirus, its impact on many fronts and the risk of multiple waves, if the latest is the third of the same kind.

Despite the optimism, a main concern remains in the run up to Christmas, especially in the United Kingdom. The government earlier planned to allow families of close relatives to mix together for a limited time during the festive time. The medical establishment, however, has not warmed to the idea, fearing a spike in infection rate – for obvious reasons.

Even if the vaccines are effective against Coronavirus, covering the entire population in a country is certainly a logistical challenge for any government in the West, despite the availability of facilities and funds, especially when it comes to storing and distributing them that need to be stored at very low temperatures.

In addition, those who are against the vaccines are growing and it poses a serious challenge against the vaccination drive. On the other hand, some people might think that we are out of the woods and openly flout the social distancing requirements, making all sincere efforts by the health authorities go up in smoke.

The latest news on Coronavirus front in the UK is that the virus has evolved to a new variant recently. This is something to be expected; we can only hope that the mutation is favourable to us – without making matter worse for the entire world.

The progress on vaccine front is particularly important for oil producing nations.

Saudi Arabia announced that its deficit will be staggering $79 billion this year; Qatar, meanwhile, said its deficit would be around $9.4 billion and hope oil price will stay around $45.00 so that it can balance the books.

It’s not just yet another Middle Eastern issue; these countries provide employment opportunities to millions of people in Asia and business opportunities to the Western companies. In short, we are all in a cauldron of despair, heated up by unforeseen circumstances.




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