The price of crude oil suddenly fell on Monday,
ending the two-week surge for inexplicable reasons, despite the multitude of positive
factors lurking on the horizon.
The growth of all major economies is improving with
the sentiment almost at the pre-pandemic level: China, for instance, recorded
25.6% increase in its export during the first quarter; in Europe and the US,
vehicular traffic is back on roads; airline industry are active again; the
vaccination rollout is going ahead full steam and there is a significant
reduction in deaths and hospital admissions.
In India, meanwhile, the normalcy slowly returns
with the rate of infections – and deaths – coming down in a moderate way; India
is still the world’s third largest importer of crude oil.
Yet, the oil price once again fell defying the
expectations. Brent crude broke through the barrier, $ 70 a battel, earlier on
Monday, only to fall back below it. Only in 2018, did oil price reach this
level.
Of course, the investors are worried about the frequency
of the volatility in the markets and some of them, prompted by the anxiety, may
have sold their stocks once the WTI hit $70 barrel.
The main factor, however, seems to be the effect of
the possible return of Iranian oil into the markets: the signatories to the
JCPOA, 2015 Iranian nuclear deal, are meeting in Vienna, the Austrian capital
again for the sixth – and final – round of talks in the hope of a breakthrough.
The two parties at the negotiation table are much
more optimistic than they were ever before with the teeth-grinding
determination to iron out thorny issues.
When I subjected an article in a major publication
in the Middle East on the current oil price, to a sentiment analysis, it scored
a significant negative value; that means, the crude oil markets are jittery
about the arrival of Iranian crude oil in great volumes, despite the guarantee of
the process being orderly and transparent.
As the talks on the JCPOA begin in Vienna, the
markets must be closely monitoring the developments; Iranian delegation may try
to reach an agreement before June, 18 – the day of the Iranian presidential
election, when the term of the current administration led by President Hassan
Rouhani comes to an end.
