The US rig count, a reliable indicator to reflect
the scale of demand of crude oil, went down during the last few days, despite
showing a recovery since the peak of the first wave of the pandemic.
It has gone down from 323 to 258, according to Baker
Hughes rig count data – a significant drop.
During the same period, the US inventories also
signalled a significant build-up. This
may indicate a global decline in demand of oil. Even in India, there is a drop
in demand, despite the trend being the exact opposite a few months ago.
As a consequence, the oil price that showed signs of
strong recovery became static again, after hitting above $45 a barrel.
Oil producing countries that rely on the commodity
to balance their books finally breathed a sigh of relief with the rising crude oil
prices.
Qatar, the tiny Gulf state, for instance, estimated
$9.4 billion budget deficit next year – the largest since 2017, when its
neighbours fell out with it and imposed travel restrictions – even if the oil
price stay above $40, a barrel.
If the oil price gets into a phase of volatile
fluctuations once again, these countries will be in a difficult position to
when it comes to managing their respective economies.
The drop in oil price have secondary consequences
too: there are millions of migrant workers from South Asia and South East Asia
who make a living in the oil-rich Middle East countries.
Their remittances offer a lifeline to countries such
as India, Pakistan, Nepal, Sri Lanka, Bangladesh, the Philippines and a few
more. That means these countries will be affected directly from falling oil
prices.
If oil price stays around $50 a barrel, the oil
producers in the Middle East and in the rest of the world may partially manage
their economies in the hope that thighs would turn better at some point in the
near future.
The era of $100-a-barrel, however, is over; only
they can hope for is a reasonable value between $50 and $100 that protects both
the producers and consumers alike at turbulent times.
