Analysts are keen on watching the crude oil markets
on Monday, especially after a lacklustre performance during the past few days,
despite a substantial drop in the US crude stocks.
Both, the EIA, US Energy Information Administration,
and the API, American Petroleum Institute, reported larger-than expected crude inventory
fall. The figures were 6.4 million barrels and 1.3 million barrels
respectively.
In addition, the US oil rig count shows an increase
as well, having been in passive mode for months.
The movement of oil prices on the investors’ screens,
however, did not reflect the usual effect associated with such a drop. On the
contrary, for the most part on Friday, the crude oil price remained red in the
screens of analysts and investors alike.
Since the Delta variant of the Coronavirus appears
to be on the wane, having wreaked havoc in the world, especially in Asia,
analysts hope the region will put the crisis behind while taking the resilience
in its stride. That means the demand will take up wings and emerge from the
ashes of the global catastrophe.
During the past few months, a relatively new trend
emerged among the major crude oil importers, when they felt the price of oil
was far too high; they started tapping their strategic oil reserves, which are
there for an emergency such as a war or a major weather event; the countries in
question do not keep it as a well-guarded secret either.
The trend has forced analysts to take the phenomenon
into account before doing their calculations - as never before. The importers
in question bought crude oil on the cheap when the price crashed in the second
quarter of 2020; by tapping them as if being in an emergency, the countries
hope to cushion the impact of rising oil prices on their respective economies.
The other factor that plays the economic equivalent
of the bogeyman is the possibility of Iran coming back to the crude oil markets
as a normal player.
Both analysts and investors are worried about the
direct impact on the crude oil supply, in the event of Iran coming back to the
markets: on one hand, Iran has never stopped producing crude oil, because of
the existence of sanctions; on the other hand, the risk of selling crude oil in
large volumes on the grounds of covering past losses will be there,
against which
not many will be argue.
The level of anxiety over Iranian factor went a
notch above this week, when Rafael Grossi, the director general of the IAEA,
International Atomic Energy Agency, paid a visit to Tehran and expressed the
hope of reviving the JCPOA, 2015 nuclear deal.
The emotions against the deal, however, are growing
in the region as never before. Both Sunni Arab states in the region and Israel vehemently
oppose the revival of the JCPOA in the current form without Iranian nuclear
activities being subjected to rigours, regular checks by the IAEA; Iran sees
the move as a well-hatched conspiracy against it by what it calls ‘West Asian
regimes’.
The removal of the US air defence system and the
associated Patriotic missile batteries from Saudi Arabia worried the crude oil
markets last week. Understandably, in the absence of such a system, Saudi oil facilities
are vulnerable to Houthi drones and missiles, which in turn can disrupt the
crude oil supplies from the world’s top exporter; it has happened before.
There was a drone attack this week too that Saudis
managed to intercept in time and destroy. Since some of the major Saudi oil facilities
are just less than 100km away from the common border between the Kingdom and
Yemen, the combination of danger and anxiety is palpable in the former.
All in all, analysts will take these factors into
serious account before making predictions, when markets open tomorrow in the
glare of evolving uncertainties.
