Earlier, Saudi Arabia, which enjoys a good pile of cash on the back of higher oil prices over the past few months, had warned against pumping oil more than what is needed now: Covid-19 still has a surprise coming and they should not make haste in ramping up production.
THE biggest crude oil-consuming economies, led by the US and China, are holding their breath as they await with anxiety the fast-approaching date of December 2.
This is the day when OPEC is to meet to discuss policies that somehow would chart the movement of oil prices in the world market in the new year.
The world’s economies, although skeptical, are keeping their fingers crossed.
All hope that OPEC would decide to pump more crude oil above its daily production of 400,000 barrels per day as a “Samaritan” gesture towards its oil-hungry clients whose economies are slowly shoring up after being ravaged by the Covid-19 pandemic over the past 24 months.
However, it is believed that the 13 OPEC member countries are not bothered by the move of the US to release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan, and Great Britain to cool down prices.
If more oil is released into the world’s economies, the price per barrel would drop below US$80, which has been the prevailing average price over the past few weeks.
But even without the US and the five other countries releasing oil from their reserves, crude prices on Friday dropped to US$69 per barrel amid worries over a new Covid virus strain gaining strength in some parts of the world, days ahead of the much-anticipated meeting of OPEC on December 2.
Earlier, Saudi Arabia, which enjoys a good pile of cash on the back of higher oil prices over the past few months, had warned against pumping oil more than what is needed now: Covid-19 still has a surprise coming and they should not make haste in ramping up production.
True. The bad news finally came.
As of Friday, November 26, oil prices were crashing, from a high of US$85 to only US$69, and oil market observers were amazed to see they were crashing spectacularly.
All because of a new strain of Covid-19 and several consequential travel limits instituted last week by governments around the world.
And this unexpected turn is a good reason for OPEC to ignore US President Biden’s call for an increase in oil production and instead, curtail output some more.
The OPEC members would not want to do that as their profits per barrel would plunge to a new depth below the current price of US$69 per barrel.
This recent development would be good for the US economy and the rest of those with oil reserves.
They no longer have to take the painful move of releasing a portion of their much-protected oil reserves just to force the price of crude to drop and shore up ailing economies.
Prices are dropping by their weight, thanks to a new spoiler coronavirus strain that is again preventing people from going on the road to drive.
When cars stop running and fuel-consuming industries slow down, fuel consumption falls, and therefore, lesser demand for crude oil from refineries across the globe.
With lesser demand for crude oil, its price would drop on its own.
Crude oil prices recently touched seven-year highs, and consumers are feeling the pain.
Retail gasoline prices are up over 60 percent in the last year, the fastest rate of increase since 2000, largely because people have returned to the roads as pandemic-induced restrictions have eased.
To hedge this off, the United States has announced a plan to release 50 million barrels, the equivalent of about two and a half days of US demand.
India, meanwhile, said it would release five million barrels, while Britain said it would allow the voluntary release of 1.5 million barrels of oil from privately held reserves.
But US and Co. might as well shelve such plans and instead, brace against the entry of the new coronavirus strain into their territories.
OPEC’s next meeting will decide the fate of its future oil production.
And plummeting prices will pressure the group not to heed President Biden’s call to increase production to force oil prices to go down.
The new strain of Covid-19 is working on it.
Tags: #Covid19, #petroleum, #oilprices, #OPEC, #globaltrade