Current situation in oil prices edging higher globally

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THIS is the current oil situation globally. The factors are many, if we believe the financial experts and analysts, that the barrel price will exceed $100 in the coming months. Today it stands at $85, and it is certain that it will go above that price in the coming days. The first factor is that there is not enough spare crude oil available in the world for production. This of course led the US administration to allow its US-based Chevron company to import Venezuelan oil after more than five years of the US boycott.

Kamel Al-Harami

Along with raw materials, there is a lack of finished and petroleum products. Even though there are enough refineries in the world, all are heading towards reducing and shutting down refineries, due to many reasons, mainly environmental. There are no sufficient returns to make the refining business profitable. However, refining is making a bonanza and mountain of cash recently. Last year, owners were making more than $35 a barrel margin of profit over the net crude oil price. Another factor is China after the complete lockdowns domestically and internationally because of COVID-19.

The country is not paying any attention to launching or pushing for producing anything and everything. Time has come to catch up and push for productivity and expansion, after three years of little or no commercial activity. China is the biggest importer of oil with 11 million barrels, which will hit 12 million this year, with nothing to stop it from consuming and seeking more imports, perhaps only if there is not enough in the markets. This means more imports from Russia and Iran, and the use of Russian and Chinese oil tankers, thereby avoiding the G27 boycott and the $60 ceiling on the price of Ural’s crude oil

Magical number
The growth in China’s economy will push global oil consumption to exceed its magical number of 100 million barrels per day. Along with the aforementioned factors, there is the easing or fear of infl ation, which was one of the main global concerns for slow growth, low economic activities, and weak demand on oil, resulting in the weakening of oil price. However, it seems that this will not be the case now.

The final factor is the value of the US currency and its exchange rate against other currencies. The stronger the currency, the weaker the local currency in terms of struggling, competing, and increasing exports to generate the needed US currency for buying the needed oil. For now, this has changed and the USA currency has weakened. The factors are in the right direction to forecast a price of $100 per barrel. Now it is up to us to determine who to believe and what to anticipate.

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]

This news has been read 10284 times!

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