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Saturday , February 27 2021

Crude price at $50 pb is a comforting number for all

INDEED, a price level of $50 per barrel is a comforting number for all. Any level above that will be a cause for fierce speculations and more headache for OPEC and OPEC-Plus.

Today’s fundamentals are not comforting for the oilproducing countries, as there is surplus oil in the global market.

Kamel Al-Harami

Any improvements in the oil prices can cause internal fights between the producers who are pushing for maximum improvements on the volume produced in order to take advantage of the improved oil prices, which will be short lived.

This is because an improvement in the oil level is the wish of all. We are in agreement regarding the need of countries dependent totally on oil income to support their economies, to avoid short-term and long-term borrowing.

They are continuing to depend on oil without thinking of the long term impacts, and depriving their own population of being creative, and not feeling the pinch or hardships like others in being creative to find alternative sources of income besides oil or making hard and difficult choices, something that is a must from the oil producing governments. The reality of the oil market globally is that it is full of oil.

Any level above $50 per barrel will be like the happy hour for all oil-producing countries from the traditional oils to shale, sand and heavy oils. The spare oil capacity could easily exceed ten million barrels from the existing producers. The arrival of Iranian and Venezuelan oils from the beginning of next year will cause a fall in the oil prices and havoc in the global oil market. It will force OPEC-Plus to face more headaches related to volume distribution with internal and external politics.

Iran and Venezuela will be joining OPEC again with handsome volume and talking from strength without any serious volume constraints.

This will lead to some internal politics and even some breakdown within the origination or even with the threat of leaving OPEC.

Certainly, next year will be a difficult one for OPEC, but it could result in a comfortable level for oil consumers globally. Oil sector will be facing new challenges next year.

It needs greater management and experienced politics to manage. However, oil at today’s $50-level is good for all. Let us not rock the boat … leave it fl oat … because any disturbance could lead to disaster in the presence of spare volume available in the market.

By Kamel Al-Harami Independent Oil Analyst
Email: naftikuwaiti@yahoo.co

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