With just less than 24 hours to go before the
crucial OPEC+ meeting, oil price showed a modest increase, reflecting the
general mood in the markets that supply floodgates will not open anytime soon.
With the chasm between Iran and the US widening in
the face of attacks on US interests in Iraq by Iran-backed rebel forces, the Iranian
factors in realm of oil markets slowly pales into insignificance; Iran’s stubborn
position on the nuclear deal does not make the process of sanctions being
lifted any more realistic either.
That means the markets will not get crude oil in
excess in the current circumstances and the trend in prices reflects just that.
Since a drastic output cut is not a universal view
among the members of the OPEC+, they may agree on a coordinated production ‘adjustment’
until next meeting in April; this is what markets sense and hence the
understandable reaction across the crude oil markets for all to see.
At the same time, the more dominant members of the
OPEC+ cannot ignore the grievances of the less dominant members, especially
when their economies entirely depend on the revenue from oil; they do not want
to lose this opportunity when they can enrich their coffers, having suffered
more than 6 years due to falling crude oil prices.
Russia that came under new sanctions on Monday, may
not agree on an extended production cut either; it desperately needs cash from
its oil and so far toed the line in line with Saudi wishes.
Two weeks ago, Saudi oil minister wanted the OPEC+
members exercise caution, perhaps, against easing production cuts much earlier
than it should.
Whether the Saudis can get their way tomorrow as
well, as they did in the past, is a development to be watched in the next 24
hours.
