Banking crisis: Need for floor for energy prices!

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The collapse of Silicon Valley Bank with its impact on other financial houses is going to have an impact on oil prices, with a drop of 10% in Brent and US oil below $70 crude a barrel since 2021. This coupled with mild weather in Europe that has led to comfortable stocks of energy, which will last may be till early part of the 3rd quarter of this year. With low demand on energy, and slower economic growth in anticipation of current financial outcome, oil prices are expected to go lower. This will lead us to find or to look for floor price for oil.Thus OPEC+ look and try to find a suitable formula.

Like European Union and G7 decision to have $60 a barrel ceiling price for Russian oil and $100 for other petroleum products. Perhaps, this should be the direction to ensure minimum in investments in oil and gas on short time basis. As US doing now days encouraging and pushing for investments in fossil energy, opening Alaska wide for more aggressive exploration and search for oil, in sudden turn away from US administration original policy against fossil energy. Realizing it is just too early to move away from oil and gas. Certainly, OPEC+ should copy Europe in imposing price limits on selling any commodity, like the Russia oil ceiling price of $60 a barrel. With the organization powerful unity and control of supply of global management that can at any time curtail oil production.

The Saudi warning is a clear message of taken any action in controlling or imposing price level to its crude oils. Besides oil should be subject to marketing forces of supply and demand. The concern is however regarding the current decline in oil prices with demand looking weak during the current and the coming 2nd quarter with oil stocks at its peak leading to further weakness of oil price which could to go $70 if not lower. This might trigger interference from OPEC+, in their forth coming meeting in June if not earlier should oil price go further down from its current level of $74. From its peak of $ 90 a barrel, with loss of $16, which means huge loss of revenues to OPEC+.

The question is at what level can OPEC- raise the warning fl ag and announce further crude oil cuts, in order oil price at an acceptable level to all. The collapse of financial institutions will certainly impact the overall economic growth, stability and could lead to further stagnation, with unknown impact on oil prices. Or we all must wait for future quarters to determine oil prices and any actions to be taken by oil producing countries.

Kamel Al-Harami
Independent oil analyst

This news has been read 11749 times!

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