The price of crude oil has been falling for three
successive weeks and analysts attribute it to a series of factors, ranging from
strong dollar to loss of consumer confidence, especially in the major
economies.
When the markets closed on Friday, WTI and Brent
stood at $80.79 and $82.17 respectively.
Having repeatedly ignored the calls for increased
production, the OPEC+ finally admitted this week that the demand for crude oil
will shrink while identifying the obvious – the rising energy costs across the
world.
The rising new Coronavirus infections, the fear of
the emergence of a new variant of the virus, acute labour shortages in the West
and global supply chain problems do not help maintaining the momentum of the
crude oil markets that saw a remarkable recovery in the two month period from
September to October.
In another development, the prospect of the
resumption of the talks between Iran and the signatories to the JCPOA, 2015
Iranian nuclear deal, is also weighing somewhat on the price of crude oil as
the agreed date, November 29, gets closer, despite the absence of certainty of
it being materialised – up until the last minute.
The main stumbling block as far as the future talks,
scheduled to be taken place in Vienna, Austria, are concerned is Iran’s insistence
on removing the sanctions first and giving a guarantee of it not being
abandoned by a future US administration.
Iran’s crumbling economy, diminishing regional
influence and the future of fossil fuel, its main source of income, however, may
compel Iran to take a more pragmatic approach while exercising flexibility in
the talks.
The negotiation teams from the West have an uphill
task before them too; the resistance against Iran getting away with its uranium
enrichment, using the talks as a smokescreen, by the Arab powerful nations in
the Middle East and of course, Israel.
If talks are going to be successful, the impact will
be felt across the crude oil markets immediately: it is not just the fact that
Iran will increase the supply of the commodity in large volumes that has the
potential to causing ripples in the crude oil markets; on the contrary, it is
the potential to cause a rift in the OPEC+, if Iran attempts to make up for
years of losses of revenue due to US-led sanctions.
These developments will be closely monitored by
analysts and investors in the energy sectors in the coming weeks.
The scale of the reluctance of the Biden
Administration to tap into the SPR, the Strategic Petroleum Reserve, despite
political cost at home, in this context, remains a litmus test to gauge the
sense of the success of talks on the JCPOA at the end of this month
