The price of crude oil has been falling substantially since the markets opened on Thursday morning, as the wider economic worries weigh on the sentiments of a snap recovery.
As of 13:15 GMT, WTI and Brent recorded $88.25 and $94.15 respectively. With the price of LNG, liquified natural gas, at $9.10, it provides a form of cushioning effect on the falling price of crude oil, as industrialists turns to oil when gas prices bite. That means, a serious crash is unlikely, despite the slowing global economy.
The price of crude oil did not receive the usual boost when the EIA, the US Energy Information Administration, reported a modest draw on Wednesday. On Tuesday, by contrast, the API, American Petroleum Institute, reported a build in the US crude oil inventories.
The fact of the matter is neither of the data made a lasting impact on the price of crude oil - beyond a few hours. With that, the data about the US crude inventories appears to be paling into insignificance in the presence of the other evolving factors; the inflation has been a key a factor, eclipsing the importance of the US inventories, those of the top global consumer.
In an ominous development, analysts have started questioning the validity of the data of the commodity, while implying it being massaged for political goals. Alex Kimani, writing for oilprice.com, has been raising this issue for the second time in his latest article in the forum.
In addition, even if the data is reliable and accurate, endless crunching of the past data never depicts a perfect trend. In short, traders and investors may lose heart over these predictions that stem from complex analyses of the existing data; if data is 'dodgy', as Alex Kimani claims, it certainly makes the issue even worse, while compelling data cynics to welcome the potential patterns with a chuckle.
In Europe, meanwhile, the crisis in the energy realm is far from over, despite the claims of reserves being 85% full; apart from the impressive number, the cost of imports and inevitable price hike that the customers are going to bear are simply not going away. That means the rampant inflation is not going to lose its upward momentum anytime soon.
On the other hand, even if the reserves are full, energy analysts fear, they may not be enough to cover the entire period of dark, cold winter days ahead.
In Europe, the autumn has already set in and the temperatures have started falling, especially at night. No weather specialist can predict how the winter temperatures are going to fluctuate in the next few colder months, leaving us completely at the mercy of nature; weather forecasters are not allowed to make their forecasts beyond 5 days ahead, after all.
Russia, meanwhile, has not run out of steam in weaponizing energy resources and the West just played into its hands by going kneejerk: the oil revenue of the former has not gone down; on the contrary, it has gone up substantially; China and India are on a happy buying spree with their refineries working in full swing; they are becoming net exporters of fossil fuels in the near future, if it has not happened already.
As I have observed in a previous discussion, the winter of discontent in Europe is far from being solved; no country in the EU has come forward so far by ruling out rationing and the price of LNG, liquified natural gas, has doubled from what it used to be at the same time last year; at these price levels, even if the supplies are maintained, the cost will trigger off an economic disaster in the coming months.
As this is the case, the US will come under enormous pressure to provide Europe with gas for winter months, despite the former has its own woes at home on energy front to be addressed.
Having failed to get OPEC+ on board with the help of two key Middle-Eastern members recently, the US turned its attention back on the JCPOA, 2015 Iran nuclear deal.
Despite the initial enthusiasm, it has lost momentum once again as Iran attaches tough conditions to reviving the deal. That means the anticipated flow of Iranian oil and gas into the markets any time soon, seems to be as distant as ever before.
The US and its allies have been releasing some of the SPRs - Strategic Petroleum Reserves - for months in order to keep the price of crude oil at bay, all to no avail.
In the end, it is the inflation that made the price of crude oil static just below $100, a barrel, not a multitude of 'strategic moves' made by 'experts' in field; the outcome was widely desired, but the cause was alarming.
Having suffered a setback from the falling oil prices, analysts fear that the UAE and Saudi Arabia will cut down on their output in order to stabilize the prices; this may be counter-productive in the long run.
The inflation has no borders: both the UAE and Saudi Arabia were recently compelled to provide its own citizens with financial help with billions of dollars in order to ease the economic pain caused by the inflation in the respective countries.
Since both countries import most of their staple foods from Asia, inflation at the source is inevitably passed on to the Middle-Eastern consumers.
If the two producers impose output cuts just to boost revenues from fossil fuels, it will boomerang on them too; it is just a matter of time.
Their concerns over the revenues have already been exacerbated by the fact that the two of its major customers have turned to Russia in order to cash in on the supply at rock-bottom prices.
As both economists and analysts, time and again, pointed out the oil prices at current levels are not sustainable; it certainly provides the producers with plenty of dollars in the short run, but even they will not be able to get out of the Karmic cycle of cause and effect in the long run.
All in all, it is in everyone's interest to keep the prices of oil and gas at a sensible level while safeguarding the interests of both producers and consumers. In this context, the OPEC+ has a big role to play in striking the right balance.
