Oil Price: the effect of triple whammy pushes the price up

 

Oil price: triple whammy

The price of crude oil, which went down yesterday, rose again today, perhaps due to the fact that the yesterday’s optimism about a quick solution for getting the stricken tanker on track in the Suez Canal was grossly misplaced.

That means the global oil supply are going to be affected in the short term, as Egyptian authorities implied that getting the traffic back along the narrow waterway could take weeks.

Of course, the tankers that have piled up carry other goods to the West as well and the ripple effect will be felt beyond crude oil markets, unless the salvage operations show a bit more dynamism than what we witnessed in the last two days.

The slow pace of rescue operations has triggered off a wave of online-memes, which could potentially hurt those who are in charge of the task as much as the tidal wave did to the stricken tanker.

The presence of a medium-sized digger in the shadows of a super tanker, for example, more or less, reminds us of the proverbial squirrel that used to wet its tail with seawater, only to wag it on the shores in the hope of emptying the ocean.

The blockade of the Suez Canal is not the only worry that rattled the oil markets.

Houthi rebels in Yemen launched yet another attack on the Saudi oil facilities causing some damage using drones and missiles. This time, their scope of attack went beyond the oil facilities, targeting even military sites.

Of course, Saudi Arabia said it would retaliate and the response, as always, will be in the form of airstrikes, despite not achieving anything substantial beyond PR victories; there is no indication that the vicious cycle will be broken very soon, despite the Saudi peace overtures to the Houthis.  

The outbreaks of pandemic across the world, especially in Europe, could potentially affect the demand of crude oil in the coming months too.

In the United Kingdom, meanwhile, the lockdown may be extended until September despite the success of an island-wide vaccination programme and plummeting infections – and deaths.

crude oil price - market sentiment


The negative sentiment that stems from the triple whammy has pushed the oil price by a moderate amount. The length of the new-found buoyancy, however, will only be in direct proportion to the time taken for the completion of the salvage operations involving the tanker.

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Judging by the progress made so far, unless international players get involved, the rescue operations will only be prolonged – much to dismay of millions who got affected.

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