The price of crude oil fell on Monday morning in the
Asian markets, which may show cascading effect in the European markets too during
the day.
The early market reaction is not something expected;
it is most probably a knee-jerk reaction to the air strikes carried out by the
US in Iraq and Syria, targeting fighters of Iran-backed military group.
This is the second time since President Joe Biden
came to power that the US carried out limited air strikes in the region.
On both occasions, the US attacks were in response
to the drone and missile attacks by the fighters in question on the US bases in
Iraq. The new US administration does not tend to retaliate immediately for such
provocations; on the contrary, the US armed forces take time, analyse the
targets and then carry out the attacks while minimizing the collateral damage;
the choice of night hours is also an indication of minimizing the loss of
civilian lives.
The Asian markets reacted as if the attacks were
going to continue for some time. They, however, are targeted limited attacks.
At 09:45 GMT, the prices of WTI crude and Brent crude
were $73.86 and $75.96 respectively.
The crude oil markets have better things to focus on
rather than one-off US military attacks. The forthcoming OPEC+ meeting,
scheduled on July 1, is a case in point.
The leading oil producers in the world are meeting
virtually for their next monthly round of discussion, having studied the market
conditions, global demand and of course, inevitable political connotations.
There is a clear indication that the group will
increase its production for August while taking into account the grievances of
customers, mainly from the developing world.
During the last meeting, in June, the group was
cautious about the move, as the probability of Iran coming back into the crude
oil markets was very high. In recent weeks, however, the optimism about an
immediate return of Iranian oil has gradually receded, although signatories to
the JCOPA, 2015 Iranian nuclear deal, maintain the guarded optimism.
In another development, the US shale industry does
not show any enthusiasm to make a quick comeback in order to cash in on rising
oil prices. The industry, having learned a bitter lesson in the past, prefers
exercising caution to rushing to start new oil rigs. The slow rise in the US rig
count reflects the new thinking in the industry.
All in all, there is no significant factor looming
over the crude oil markets to hamper its upward trend – apart from an increase
in the output by the OPEC+, that could be temporary too.
