As the Suez Effect has died down, the oil price seems
to be heading towards its equilibrium – the position it generally held before
the maritime incident; it’s premature to call it a crash, though.
It is true there is a serious risk of some European
nations going back into lockdown; there are relatively success stories too in
the battle against the Coronavirus in the continent.
In the United Kingdom, for instance, the success of
vaccine rollout continues despite the concern raised about some side effects of
the vaccines. In direct proportion, both the death rate and that of infection
have plummeted; for the first time, London reported zero deaths on Sunday since
the first lockdown.
Although the people in the United Kingdom are not
out of the woods yet, the restrictions have been eased in hope individual civic
responsibilities will be fulfilled by the masses without leaving the
authorities in a lurch; the restrictions on the movements may be eased too beyond
local areas.
In light of these developments, there are
considerable, heightened activities at petrol stations, which mean the demand
for fuel could go up in the coming weeks; an exponential increase, however, is
unlikely as it usually takes time to get used to the New Normal.
In the United States too, the world’s largest crude
oil consumer, the vaccine rollout is in
full swing across the states and the demand will pick up as we go into the
spring; the inherent positive effect of the season will be a factor that naturally
lifts up the mood of the people in the northern hemisphere.
The growth in India and China is picking up and the
economies are growing. That means the demand for crude oil can only grow as
transport and production activities accelerate.
Since both countries bought crude oil on the cheap
and stored on a massive scale during the oil crash in 2020, they may tap into
them when the prices go up beyond a certain point; in this context, the inbound
movement of oil tankers to the ports cannot be the only measure that determines
the national demand of each country.
At global level, there are indications that the
OPEC+ will stick to its current production level while Saudi Arabia maintains
its voluntary cut of 1 million bpd; Russia will not the rock the boat, but may
win some concessions, as it did on two previous occasions, to increase its own
production by a moderate amount.
In short, the Saudi position of exercising caution
rather than getting caught up in an emotional wave, is already gathering
momentum in the corridors of OPEC+ power; in response, the forthcoming meeting
of the OPEC+ in April, in all probability, is going to be a foregone
conclusion.
