AFTER a few months of stability that lifted the crude oil price from its bottom of less than $20 to $45 per barrel, the oil market will be facing another decline in the coming months.
This is certainly not a good indication at a time when almost all OPEC-plus members are committed to full adherence. Breaking ranks and over produced volumes hitting the market is leading to a jittery market, disintegration of unity, and disarray.
Earlier, OPEC-plus had to manage two member states and force them into full adherence. However, it now seems like a third member is breaking ranks to create confusion in the oil market. Saudi Arabia now has to manage the situation before it gets out of hand, which will cause further deterioration in oil prices.
Currently, oil traders are booking ships to carry surplus oils globally for a second round of making place for the new oil without any fixed place; thereby leading to repetition of the months of this year’s first quarter.
Let us hope that another oil glut will not occur as it will cause further reduction of oil prices. This is because none of the oil producing countries can cope again with another price massacre, as it could lead to bankruptcy of governments and institutions, as well as further belt tightening and also poverty.
By all means, OPEC-Plus must retain and take control of its historic agreement for reduction of 9.7 million barrels of oil production, and ensure all members suffer equally. It is not the time to go back and plan again or meet again to put the OPEC-Plus house in order again.
Saudi Arabia is requested once again to work behind the door. It must use its power to bring some order to the oil market again at the earliest. In any case, our oil market is so exposed and fragile that even the slightest factor can blow away any oil gains since March of this year.
The markets are just not ready for another oil decline and for the second wave of COVID-19 as well as further glut coupled with lower income to our treasuries. It is just not fair.
By Kamel Al-Harami
Independent Oil Analyst