Oil Price may hit above $70 soon: OPEC+ will not buckle under pressure


Weekly oil price

With the latest OPEC+ decision, which was a foregone conclusion anyway in light of the enormous power that Saudi Arabia wields in the organization, the crude oil price started rocketing on Friday, despite the substantial increase in crude oil stockpiles in the US.

Usually the US crude oil stockpiles is a reliable indicator when it comes to determining the price of oil; the higher it goes, the lower the price becomes.

This time, however, the crude oil price defied the rising crude oil inventories while adding yet another surprise to the spectacle of crude oil price fluctuations.

us oil stockpiles

If the trend continues into next week, the price of crude oil, both Brent and WTI, will go beyond $70 a barrel; it will certainly be reflected at the pumps when you go to fill the tanks.

In the United Kingdom, motorists already feel the significant rise in price at service stations, having been unable to put their vehicles on the roads when the price plummeted at the pumps – for obvious reasons.

World’s top consumers, meanwhile, cry foul for not increasing the crude oil output by the OPEC+, fearing what could potentially happen to their fragile economic recoveries.

These countries, however, made hay while the sun shone: both India and China, for instance, bought millions of barrels on the cheap at the height of the pandemic last year when the producers, especially in the Middle East, could not sell their crude oil; they went on a buying spree up until they ran out of storage facilities; both Saudi Arabia and the UAE even lowered the oil price for Asia during this period, giving buyers yet another opportunity to maximize their gains.

In this context, it is understandable why the members of the OPEC+ did not heed the concerns expressed by world’s top buyers.

The rising oil price, meanwhile, will create a lingering headache for the Biden administration, if it continues unabated. If the price continues at this rate, the transport costs will rise and that will, in turn, increase the price of essential items, at a time when millions of Americans are making ends meet with the aid of government handouts.

Since the administration is against fracking in principle, it will be a monumental challenge for the American oil producers to get the production back to pre-pandemic level.

In short, President Biden will be forced to walk a tightrope of energy in a matter of weeks, unless he makes a politically-suicidal policy change.

If President Trump was in power, he would have expressed his displeasure at the rise in oil price by now, even if it bordered on not-being-very-presidential; being a businessman, he could sense the impact on businesses weeks before it actually hit.

At present, there is no cohesive political will to force the OPEC+ to do at least a partial ‘U-turn’. Apart from the murmurs from Asia, neither the US nor Europe voiced concern over the production cuts, perhaps not to upset green lobbies in their respective countries.

That means the OPEC+ will stick to its guns, perhaps, justifying it on the grounds of past losses it had been suffering since 2014 – up until the third quarter last year.




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