Despite the presence of volatility in the crude oil
markets, the OPEC is still optimistic about the demand of the commodity during
the next few months of this year and for the entire next year.
Although the emergence of the Delta variant of the
Coronavirus has dealt a critical blow to the recovery of the global economies,
the OPEC still hopes that the average demand of crude oil for this year is
going to be around 96.6 million bpd; based on these estimates, the organization
believes the same figure for the next year will exceed 100 million bpd.
The OPEC must have taken into account the way the
US, China and India have been affected by the new outbreaks of the pandemic:
last week, there was a build-up of US crude inventories and according to the
latest data from the EIA, US Energy Information Administration, there was a
modest draw of the crude stocks for the week ending August 06 – just 0.446
million barrels; the crude imports by both China and India, meanwhile, have
gone down significantly, throwing the forecasts to the contrary into doubt.
In addition, the other major crude oil importers in
the regions such as South Korea, Japan, Thailand, Malaysia and Indonesia are
going through critical phases of the pandemic, leaving large swathes of the
lands in extended lockdowns.
The combined impact of these developments is going
to skew the demand curve of the commodity in a direction that we thought never
happen, especially in the second and third quarters of this year, because of
the relative success of the vaccine rollout.
The OPEC, however, still believes that the demand
will survive the worrying developments. The basic calculations have made OPEC
increase its daily production by 400,000 bbd up until December, 2021, without
letting the price of crude oil drop.
In an unusual development, President Biden has waded
in to the debate of high oil price; the wants OPEC to increase the production,
not to let the inflation getting out of control. So far, OPEC has been remaining
tight-lipped about the response; the organization, however, cannot ignore the
presidential request.
The irony is that President Biden is in the middle
of a ‘revolution of green energies’; a move of this kind may not go down well
with those who want to accelerate the green movement at the expense of fossil
fuel.
President Trump used to do the same when he felt
that the price of oil was far too high; in his case, not only did he demand
that they come down, but also pressurised both allies and acquaintances alike,
to get what he wanted.
With the revival of the JCPOA, 2015 Iranian nuclear
deal, being on ice, the possibility of Iranian oil arriving into the markets
appears to be very remote.
Therefore, OPEC will be compelled to address the
issue of crude oil price without harming the fragile growth of economies across
the world.
