The price of crude oil appears to have recovered the
losses suffered throughout the last week. It got the much-needed boost this
week when the data from the API, American Petroleum Institute and the EIA, US
Energy Information Administration, showed draws in the US crude oil
inventories.
The EIA reported a draw of 3 million barrels and the
same from the API was a modest 1.62 million barrels.
Analysts feared that the outbreaks of the Delta
variant in the US would hamper the demand for oil. Although the infections are
on the increase, the development has not resulted in the anticipated steep decline
in vehicles on the roads.
The investors are upbeat about China becoming the
key crude oil importer – once again; it has successfully kept the spread of the
outbreaks at bay and the Chinese economic activities are limping back to
normal, implying a recovery in its crude oil markets.
The latest data shows that Chinese crude oil imports
fell by 5.7% in June and July, compared to the same figure during the same period
in 2020.
Analysts, however, are not certain whether the
decline in imports is due to subdued economic activities or China turning to
Strategic Petroleum Reserves to deal with rising oil prices; the statistics
from China showed that economic activities have slowed down recently.
At present, the whole Asia, not just China, is going
through a bad patch due to severe outbreaks of the Coronavirus. Since some of
the major crude oil importers are from Asia, the impact of the falling imports
on the crude oil markets can easily be seen when the official figure are out.
The crisis in Afghanistan also used to weigh heavily
on the crude oil market last week at political level, in proportion to the
disturbing headlines across the globe.
Since the political instability in the Middle East
is still a cause for concern, analysts and investors focus heavily on the political
developments in Iran and its neighbours, in addition to taking into account the
familiar factors that affect the price of crude oil.
Last week, for instance, the leader of Hezbollah,
the Iran-backed militant group, said that a shipment of oil is imminent from
Iran to Lebanon to address the severe shortages of the commodity of the latter.
Although the leader of the Hezbollah called the
bluff of the US and Israel, there is no sign of it being materialized. Perhaps,
the Lebanese government may have persuaded Hezbollah to abandon the move,
fearing sanctions against the beleaguered country by the US.
The volatility in the Middle East, meanwhile, shows
no sign of abating and the potential for a serious crisis breaking out is as
high as it was before months ago.
All in all, the political developments in the Middle
East could hamper the price of crude oil at any moment due to the fears of flow
of crude oil across tense channels.
