As the US crude oil inventories have been falling
consistently since November, new concerns have been growing in the same
proportion about the scale of the challenges, when it comes to meeting the mounting
demand.
The unrest in Kazakhstan, the former Soviet Republic
in Central Asia, the worsening situation in the Libyan oil sector due to the
influence of competing militia groups for dominance, Nigeria’s inability to
sticking to its OPEC+ quota due to endemic problems at loading facilities have exacerbated
the potential disruptions in the supply chain.
The failure of some members of the OPEC+ in contributing
the quota agreed upon by the members surfaced in the recent monthly meeting of
the block too; in short, although the members, in principle, agreed to increase
the daily output by 400,000 barrels, in practice, it had not materialised in
the past; nor will it work that way either in the near future, judging by the
news that comes from the member nations.
Even Russia faced mounting challenges in boosting
its production and making its share of quota available to the crude oil
markets.
Some analysts believe that the challenges faced by
the producers, to some extent, stem from the lack of investment in the sector
by investors, who are worried about future prospects due to relentless march of
the renewable sector.
In this context, oil traders have correctly gauged
the mood of the crude oil markets, which resulted in a substantial increase in
price.
When the crude oil markets were closed on Friday, WTI
and Brent stood at $78.90 and $81.75 respectively.
The talks on reviving the JCPOA, meanwhile, have
already lost steam and continue at a lethargic pace, while signatories
maintaining an understandable, diplomatic optimism.
With that, the potential contribution to the crude
oil markets by Iran remains a distant reality.
That means the misplaced fear of crude oil markets
being overwhelmed by the Iranian oil is slowly fading away as far as investors
are concerned.
The rise in the price of natural gas, meanwhile, is
adding an additional anxiety to the crude oil markets – at a different level. It
is usually blamed on the plummeting temperature in the norther hemisphere, which
used to enjoy unusually high temperatures, a few days ago.
If the price of crude oil continues to rise at this
rate, yet another political intervention is unavoidable in terms of releasing
SPRs, Strategic Petroleum Reserves, despite its failure to achieve the intended
goal – or the glory.
