Oil Price: what will happen when planes are back in the skies?

 

Heathrow on Tuesday

Having risen steadily – and somewhat alarmingly – for more than a week, Brent crude price has slightly gone down for most of the day on Tuesday.

Major oil producers in the OPEC, meanwhile, still think the price of the crude oil is in the right range as far as their economic issues are concerned, thanks to the output cut.

The minnows in the organization, however, do not see it that way and reluctantly agree with cuts; they want to sell as much oil as possible and earn revenues as a matter of urgency, but their room for manoeuvre is severely restricted by the organizational obligations; Nigeria is a case in point.

Against this backdrop, analysts are keen on following the next month’s meeting of the OPEC+, as the outcome of these monthly meetings happen to be the single most significant factor in determining the crude oil price.

The relative success of vaccine programmes, meanwhile, is bringing the traffic back on our streets despite lockdowns – and the outbreaks of new variants. The major crude importers of Asia, India and China, are back in the game and demand is slowly approaching the pre-pandemic level, despite the price being raised by the oil producers in the Middle East for the region.

Oil price has shown the remarkable recovery since the peak of the pandemic, when a major sector is still in the doldrums, having been completely decimated by the pandemic – the airline industry.

The image shows the situation at Heathrow airport in the United Kingdom at 3pm on Tuesday; there was not a single plane in the air; just two planes could be seeing taxing.

Heathrow airport used to be the world’s busiest airport up until a few years ago with a plane in the air at every 2-mintue interval; the sad picture sums up the current predicament of an industry that helps millions of people make a living, across the world.

Of course, it’s just a matter of time before the planes will be back in the air; when it happens, the demand for jet fuel will jump up exponentially and the oil price will react in proportion.

Analysts are concerned about the ceiling of the crude oil price when the air-travel factor starts playing its role in the oil equation; if the current trend is anything to go by, it is only going to be more dramatic, defying the stuff in the text books.

 

 

 

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