On the seesaw of uncertainty, the speculators of the price crude oil and two of the major producers of the OPEC+, are, metaphorically speaking, trying to get their respective way to buckle the prevailing equilibrium of the oil markets on the fulcrum of sentiments - at least, according to one prominent member of the latter.
With that ultimate goal in mind, Saudi Arabia, the world's top exporter of crude oil, announced this week that the voluntary production cut of 1 million barrels per day - bpd - announced for the month of July, would be extended for August as well.
No sooner had the Saudis announced the decision of the kingdom than Russia jumped on the bandwagon; Russia announced it would cut the production of oil by 500,000 bpd as well.
If the production cuts announced by the Saudis and Russia go ahead as they promised, the global oil output would drop by 1.5%. Since the sentiments always form a serious driving force behind the oscillation of the price pendulum, the price of crude oil rose by about $1 last week, despite that being far below the expectations.
It is perfectly understandable: a drop in supply inevitably leads to an increase in demand and vice versa; the rise in price, however, is not mathematically proportional to the quantified sentiment of the analysts and investors - far from it.
As the day wore on, at the close of the markets on Thursday, the price of oil has fallen back to a value closer to $70, making the production cuts and its inevitable corresponding sentiment almost irrelevant, when it comes to the determination of the price of the commodity.
The reality may have upset the two prominent members of the OPEC+.
As for Saudi Arabia, for instance, on one hand, it is selling oil below the breakeven price. On the other hand, the fall in volume to be sold and the drop in price mean a substantial drop in its oil revenues.
Moreover, two of its long term customers, China and India, have already turned to Russia for tapping into what the latter could offer at highly discounted prices.
Russia is in a similar predicament too: its oil revenues are far below what they used to be before the invasion of Ukraine. The dip in revenue can only get exacerbated, if Russia goes ahead with the proposed production cuts in strict sense.
In another significant development, the UAE, United Arab Emirates, said there was no need for further production cuts in light of the voluntary production cuts announced by Saudi Arabia and Russia.
His statement implies the fact that persuading the members for collective production cuts by Saudi Arabia, the de facto leader of the OPEC+, is easier said than done, because no county in the alliance wants to lose its revenue amidst economic and political upheavals.
In these circumstances, any attempt to imposing its will by a powerful member of the cartel on the weaker members could potentially lead to a serious rift in the latter. In the context, the position laid bare by the UAE could not have come at a more crucial time.
When the investors, meanwhile, were hoping for a shining light at the latest OPEC+ meeting last week, in order to gauge the mood of the oil producers, what they got was something that muddied the water instead.
The cumulative impact may have left the investors in a state of limbo while turning them into cynics in the number game of production cuts - or lack of it. The slow rise in price - and its subsequent fall - shows that investor apathy in this particular commodity market is real - and palpable.
The lingering anxieties never got the antidote that the investors were hoping for that in turn left them in a less buoyant mood than it was before.
In conclusion, the prevailing pessimism as far as global economy is concerned has cast a menacing shadow over the investor confidence in the crude oil markets, clearly defying the effect of substantial production cuts. With that, as far as the highly ambitious producers are concerned, the room for maneuverer is getting shrunk every passing day.
