DESPITE the oil price reaching the highest level more than one year ago, the rate of oil supply is still higher than the demand for oil.
With the world still under the mercy of COVID-19 and its mutations and with lockdown in most parts of the world, there is no real demand for oil yet, especially since oil consumers are withdrawing from commercial stocks.
Meanwhile, OPEC-Plus is keeping the supply tight and maintaining overall control of supply, as it is scared of any additional supply until normal life presumes, or once the oil-consuming countries start to complain of higher oil prices or further escalation of oil prices.
OPEC-Plus will certainly come under pressure if the barrel price goes any level above $ 65 per barrel, as it could lead to sudden increase in supply, while the demand is not forthcoming until all traces of the pandemic disappear, which is not likely to happen by the end of the current year.
Of course, the Coronavirus relief fund of $1.9 trillion will lead to stimulating the USA, as well as the global economy, particularly China, which is the second world economy to work in tandem with others to push for global growth.
Nevertheless, the demand picture is not clear, with China still not being around, especially since the rate of travel has plummeted by more than 65 percent due to fear of COVID-19 spread, which is making all of us very concerned.
The same goes to our country Kuwait where the number of new COVID-19 cases is on a rise, reaching more than 1,000 per day since last week. This means extra precautions must be taken or else we will end up facing the return of lockdown.
Despite the increase in oil prices to hit $60 and above, the demand picture is not clear. The non-OPEC producers are marching to increase the production, and perhaps eat into the market share of OPEC and its Plus-partners… but for how long?!
By Kamel Al-Harami
Independent Oil Analyst