THE announcement made last week about the discovery of a vaccine for treating COVID-19 was met with jubilation and the escalation of oil prices.
There is also a jump in the oil stock share prices of Exxon- Mobil, Chevron, BP, and Shell. Therefore, the oil prices are to remain strong, and poor oil prices to remain behind. However, the hard fact remains that oil will continue to be weak, and the prices will not go beyond $50 per barrel even within the next five years.
This is because there is just too much oil in the market, and last year’s consumption level of 100 million will never be reached again. The good news concerning the new COVID-19 vaccine did help the oil prices in going beyond the $40 level, but the future level will not go beyond $47 level by 2023 and will not hit higher than $50 at the end of 2025. This is as per the indications of the future oil prices for the coming five years.
This is an unhappy scenario for those dependent on oil such as Arabian Gulf oil producing countries, as our hopes are on our sole source of daily income. This will not ensure the provision of all necessary funds for us to meet our financial needs.
It will be impossible, as our need in Kuwait is for the oil price to be $85 a barrel, while for the rest, it is $90 and above. Of course, we will keep hoping and dreaming. Should we believe and trust the forecasters of oil prices? The fact remains that there are still plenty of barrels in the markets, even with the new US administration in the White House and its green policy as well as prevention of oil exploration in federal lands and cutting down on further shale oil production.
There are still plenty of oils within the OPEC and non-OPEC countries ranging between 10 million and 12 million, and with more to come from Iran. If the new USA administration lifts the sanctions on Iran and Venezuela, it will make the market awash with cheap black gold. This is not what is anticipated but it is a real sour fact.
Even if the demand for oil increases and topples 100 million barrels, there is more spare surplus crude oil available. So we in Kuwait have to find a replacement for oil instead of looking forward to better and improved oil prices. Oil is not the solution. Is anybody listening or doing anything about replacing it?
By Kamel Al-Harami Independent Oil Analyst