Oil price may have fluctuated slightly this week,
perhaps due to the anticipated disruption to production and distribution in the
wake of Hurricane Delta.
The inventory data from EIA, US Energy Information
Administration, meanwhile, shows that the downward trend continues, giving hope
to investors that yet another crash like that happened in April this year is
highly unlikely.
The oil producing nations have been severely hit by
economic downturn, amplified by the Covid-19 pandemic. In these circumstances,
the OPEC members cannot keep reducing production indefinitely just because they
are under obligation to act in unison; it’s easier said than done.
On the other hand, the production cuts did not
produce the desired outcome for the organisation.
In this context, the Saudis showed pragmatism by
reducing the price of crude sold to Asia, a few weeks ago; it was a step in the
right direction, as the region was not hurt as bad as Europe and America did
during the pandemic.
Of course, investors aspire to see high oil price
for obvious reasons. They can breathe a sigh of relief from the fact that prices
may stabilize between $40 – 50 in the coming months, especially in the current
precarious circumstances.
It may not be the ideal goal; nor is it the light
end of the tunnel. It is, however, is a clear sign the economies are recovering
at a steady pace.
Charts that matter are here:
