The oil price recorded a modest rise this week
despite the significant drop in the crude stocks in the world’s biggest
consumer of the commodity, the US.
Both the API, American Petroleum Institute, and the
EIA, US Energy Information Administration, came up with the encouraging numbers
that showed a consistent drop in the US crude oil inventories for the week
ending September, 10.
In addition, the US oil rig count has gone up as
well, having been in the doldrums for months.
Despite the demand being back on track, the slight
rise in the crude oil price in the markets has baffled the investors and
analysts alike.
On one hand, the countries across the world are
coming to terms with the impact on their economies by the new Delta variant of
the Coronavirus; on the other hand, the crude oil inventories are falling
across the world.
Yet, markets chose to exercise caution rather than
being buoyed by the statistics, which usually push the price up in the current
circumstances.
This means the countries, especially the major
consumers in the developing world, are worried about the rising oil price and
its impact on the fragile economic growth in their respective countries.
Having learned the bitter lesson of futility while making
multiple public appeals to the producers to increase the production, the
countries in question have resorted to tapping their strategic oil reserves
rather than buying at higher prices.
The markets have been sensing their pulse and are
resisting to getting carried away by the factors that are in favour of raising
the price of crude oil.
As far as the oil producers are concerned,
especially those which are from the Middle East, a fear of over-supply hangs
over the decision making bodies of these countries.
They are worried that Iranian oil may come back to
the markets at any time in the near future, when Iran decides to revive the
talks on the JCPOA, 2015 Iranian nuclear deal.
Despite the sanctions and its inability to sell in
the open markets, Iran has been ramping up its oil production in the hope of becoming
a normal player in the realm.
If Iran is allowed to sell, they will open the flood
gates despite the risk of its immediate impact on the price, because the former
just wants to compensate for the losses it suffered on many fronts due to the
US-led sanctions.
The process of reviving the JCPOA got a further
boost this week, when Rafael Grossi, the Director General of the IAEA, International
Atomic Energy Agency, visited Tehran and expressed his hope for a new round of successful
negotiations.
The relations between Shia-dominated Iran and
Sunni-dominated Arab countries in the region, however, are far from cosy. On the
contrary, the gap between them is frighteningly widening.
The Arab nations in the Middle East and Israel can
potentially erect road blocks along the way to the revival of the JCPOA, citing
their security concerns.
Analysts, in this context, prefer to watch the
developments in the Middle East to going with the flow at present, leaving the
investor in an uncomfortable lurch.
