The oil price is falling and the pattern of fall on
a given day remains puzzling, though.
In the past few days it was as if the crude oil
price followed the apparent movement of the Sun across the sky!
In the early hours of the day when the markets in
the Asia open, the price picks up only to fall again as the day wears on.
They mystery deepens when the investors’ screens go
green in the very region that is most affected by the Delta variant of the
Coronavirus nowadays. Of course, they turn red too, when the markets in the
rest of the world open.
In short, the price fluctuations just defy the
logic: the uncertainties in the markets are many – and rising; the viability of
US stimulus package is widely debated among the decision makers; the Chinese economy
has hit the buffers; there are renewed fear of Middle East plunging into
turmoil, yet again; the Delta variant is spreading fast across the globe and
lockdowns are imminent in many parts of the world.
The main worry for the markets at present is the
situation in Asia. The pandemic has raised its ugly head without sparing any
nation in the region, which in turn brings down the demand for crude oil; there
is no indication to imply the light at the end of the tunnel yet, as far as
Asia is concerned.
The OPEC+, meanwhile, says there is no need of heeding
the request by the White House to increase the production. OPEC+ argues that in
light of the falling demand, its daily increase of 400,000 bpd, agreed by the
members, from August to December is good enough to maintain the price at a sustainable
level.
If the US curtails the stimulus package, however,
the US may be compelled to address the issue again while setting the focus on
the OPEC+ again if the inflationary pressure starts biting.
Although the OPEC+ says it has no intention of increasing
the output, it doesn’t offer a cast-iron guarantee that its position will not
change for the next few months; Saudi Arabia, its de factor leader, will not
make any decision to antagonize the US, especially when the Kingdom is at the
mercy of US Patriotic missile system to avert streams of explosive-laden drones
from Yemen.
No model or algorithm predicted the predicament of
the oil markets a few months ago and some forecasts, such as hitting the crude oil
above $100 that simply bordered on outrage, have just gone up in smoke.
