‘Oil can no longer save us’
OIL producing countries should be really happy with the current oil price of $ 42 per barrel. Even though the supply is on the rise with the arrival of 700,000 barrels of Libyan crude, the end of Norwegian oil workers’ strike and the end of the hurricane in the USA, oil price maintained its strong position.
However, the arrival of the second wave of COVID-19 almost globally with no cure, which could push for further lockdown, kills any chance or hope of a speedy economic recovery.
At the same time, OPEC is trying hard to maintain its strict discipline and seek further cuts in order to make room for Libya. Its members are getting fed up with the lockdown style of full compliance, without any leeway like in the past.
If any member overproduces, they must pay for it promptly within the next 30 days. Excuses are no longer acceptable. This is the hard reality. Full compliance is not enough, and oil ministers are under pressure and facing criticism from their government, as there are no improvements coming from such reduction and strict quota.
Oil prices are still not moving and continue to remain at the $40 level. Suffering from shortage of income, some OPEC countries are seeking financial assistance to manage their cash flow by any means, with no immediate hope. As this is not enough, there is another possibility for OPECplus to ask for further cuts because the demand for oil is static and there is a chance for further slip on call for more oil or demand for oil next year and in the years to come.
This will depend upon securing a proper vaccine for COVID-19, which is yet to happen. The era of depending on oil as a sole source of income is over.
Oil countries must listen and believe their ears and eyes. Oil can no longer save us, our budgets and balance of payments. The old good days of oil are over.
The hard reality is to live and depend on another source. What if OPEC-plus decides on further cuts or if COVID-19 lasts another year without a cure, especially since the demand for oil will not reach its last-year’s figure of 100 million? Is it not time to look at ourselves in the mirror without oil in the background? Is it not time to look for anything but oil?
By Kamel Al-Harami Independent Oil Analyst
Email: naftikuwaiti@yahoo. com