Oil price that has been rising for the past few
weeks, judging by the above chart, shows signs of becoming static – finally.
Neither the cut in output by the OPEC+ nor the
significant drop in crude oil stockpiles moved the price up, buckling the
widely-anticipated trend.
Do the investors know something that is not depicted
by these charts that we do not know? It remains to be seen.
Of course, the Coronavirus infections show no sign
of abating; there is no heighted alarm among the public either, perhaps as a
psychological offshoot of what is known as Covid-19 fatigue.
The rate of deaths in Europe and America, especially
among the elderly, however, is still alarmingly high, with the United Kingdom
and the USA leading on that front in the West.
Although, vaccines are being introduced by the drug
companies with varying efficacy rates, even the rich nations in the world,
including those with a global reputation for efficiency, are struggling with mounting
logistical challenges.
Adding insult to injury, petty political fights
broke out among some of the political elite, hampering even the distribution of
what the companies already have.
The move by the EU to block the arrival of vaccines
to the United Kingdom is a case in point, although the former backed down at
the eleventh hour, knowing the potential consequences of the unprecedented
move.
The vaccine effect will remain in the hypothetical
realm, until the experts see a significant drop in infections; when the latter
insist on maintaining the social distancing and masking the individuals in
public, even after being vaccinated, it does not shore up the confidence; nor
does it show the light at the end of the tunnel.
On crude oil front, meanwhile, there are reports
that the OPEC+ may ease production cuts, perhaps, knowing the risk of going for
the kill of the golden goose.
With oil price at the current level, the producers
can balance their books, as the price they were hoping for was something around
$45 a barrel in the current circumstances.
On the other hand, the members of the OPEC+ do not
want the shale producers in the US to make a triumphant comeback with new
innovative methods to keep the production costs low.
The OPEC+ can divert their energy in better channels
while investing in methods such as carbon capturing, rather than making ill-conceived,
knee-jerk efforts to take on shale producers – once again; the group did not
succeed in their previous attempt - by flooding the markets with crude oil to
push the shale producers to the wall.
Oil producers can learn a lesson from late Steve
Jobs, the co-founder of Apple, who single-handedly was on a mission to destroy
Android operating system, accusing the latter of ‘theft’, when he could least
afford to do it at the peak of a serious health crisis.
Not only did Android survive, but also thrived
having the lion share of the mobile phone market.
Against this backdrop, it is encouraging to see that
some progressive member of the club, such as the UAE, is investing heavily on
carbon capturing. In this way, oil producers can steal at least a fraction of the
limelight that is almost a monopoly of the renewable camp at present.
All in all, the stakes cannot be higher for the
OPEC+: they have to address the budget deficit issues, keep their populations
happy with generous welfare measures and of course, seek innovative methods to shield
themselves from the cumulative accusation of polluting the atmosphere.
In short, oil producers in general and the OPEC+ in
particular, need a shot in the arm; they cannot afford to shoot in the foot,
instead.
