WITH the number of COVID-19 cases in India reaching high figures of about 400,000 per day, and with i n c r e a s e d daily death rate reaching about 3,000, the rise in the oil price will have to wait until the end of next month. This is a sign that the COVID-19 situation is still influencing economic growth. Despite the opening in USA and China as the biggest consumer of oil, and the mover of world economy, the third highest oil consumer India will emerge later to close the circle; i.e., provided that no other country will face such a situation that the rest of the world experienced. Oil is bound to move upward once the volume of oil stock runs out, or once the cheap oil of early last year diminishes.
The optimistic view of oil coming to life and hitting the level of $70 should happen before the end of the current year, provided OPEC-Plus sticks to the strategy of committing supply and ensuring the additional volumes from Iran, Libya and Venezuela are limited. Since these countries and others are keen to see oil prices rise, they do use their spare capacity. So far OPEC-Plus has been doing fine and managed to push the oil prices from its low of $20 per barrel to its current position of close to $67. This is because of the huge sacrifices made by Saudi Arabia in keeping one million barrels out of reach in order to discipline the supply and maintain stability in the market. It had to do it in order to ensure smooth and steady price movements without disrupting the oil market and consumers, and with the uncertainty surrounding the global transition of growth and sustainability.
Oil price must move upward, as the world is witnessing each person being stuck at home, locked down, and using nothing except for the essential items such as food. They are still not allowed to go out freely. Yes, we have to be ready for the crowds to come out for different activities particularly for traveling by all means of transportation. They are waiting just to get out of their homes to hit the road, and go on a spending-spree, as a lot of money was saved, and the time will then come to spend all at once. After waiting for the virus to disappear or to find a cure for the pandemic, the world economy will revive and come to life again within the next few months. This is why the economists are forecasting a great boom, something that the Americans are certainly looking forward to. India will hopefully not take time to see the oil prices are booming. The barrel of oil reaching $70 will not be far, provided there is discipline and organization of smooth entry of supply to the marketplace again.
By Kamel Al-Harami Independent Oil Analyst