The price of crude oil significantly fell on Monday
defying the usually favourable factors to the contrary such as the drop in the
US crude oil inventories and the clear upward trend of global demand.
As of 10:30 GMT, WTI and Brent recorded $70.51 and
$74.04 respectively; the prices of both benchmarks fell by nearly 2%.
Of course, the Delta variant has not gone away yet,
but there is a decline in the rate of infections and deaths across the world.
Apart from random lockdowns, the pandemic does not petrify the masses anymore,
as we slowly come to terms with its presence among us and adapt ourselves just
to live with it.
Then, what on earth is going on with the price of
crude oil?
It is true that the major oil importers in the world
such as China and India are resorting to tapping their strategic petroleum
reserves, SPRs, in order to curb the rising oil prices. It, however, can never
be a long term fix to the problem, because reserves are not bottomless pits; not
only are they for a rainy day, but will be depleted too, if a balance is not
struck.
Having understood the gravity of this ‘solution’,
even if it is the last resort, the importers are turning to the producers again
in order to get a sympathetic ear.
Hardeep Singh Puri, the Indian petroleum minister,
for instance, has called his Saudi counterpart, Prince Abdul Aziz bin Salman,
for the second time in as many months on Friday, most probably in this regard. Mr
Puri described the conversation as cordial; Mr Puri’s predecessor, Dharmendra
Pradhan, had a public spat over the same issue with Prince Abdul Aziz in April,
this year, when the latter asked the former to use the petroleum reserves that
India used to fill up, when the price of oil hit rock bottom in 2020!
On its part, Saudi Arabia has already reduced the
price of crude oil by over $1 for Asia this month. Iraq, the world’s fourth
largest crude oil producer, has done the same by an even bigger amount. In short,
the producers are not ignoring the plea from their regional customers.
The producers have their point to make too; the
commodity in question is highly taxed in many countries in the world, including
Europe. That’s why producers, more often than not, grumble about this aspect of
the oil puzzle – without going public on it for obvious reasons.
As far as the major oil consumers in Asia are
concerned, if the price of crude oil goes way above where it is now, the
post-pandemic, fragile economic recovery is doomed to collapse.
The other worry that looms over the crude oil
markets is the security vacuum left by the abrupt withdrawal of the air defence
system and Patriotic batteries by the US from Saudi Arabia, implying that the
region – or protecting long-term allies – is no longer strategic.
With that the oil infrastructure both Saudi Arabia
and the UAE are exposed to growing external threats. The sudden visits made by
the Crown Prince of the UAE - with the promise of huge investments – to the UK
and France, analysts believe, show the gravity of the issue felt by the two
major oil producers in the Middle East.
Since no country on the planet can substitute the US
on the military front, the security concerns faced by the Kingdom, the world’s
top oil exporter, will remain in the psyche of analysts for months to come,
unless the issue is amicably resolved.
