Midfield play is often boring – but the one going on in the oil market is anything but. Both sides have had various shots at target. The scores are level, with the bulls having a slight edge in terms of shots on target and possession. Such has been the see-saw in the oil markets, that the tables seemingly turn every fortnight – leading to claims of sustained bull or bear runs - depending on which side you are on.
Another week of oil price gain has apparently strengthened Opec Plus position as the dominant force, that can still call the shots. The Western media and US agencies reporting on energy have been trying to bring oil prices down by pinning the hopes on the likelihood (albeit small) of a global recession in general and USA’s in particular, and challenging China’s post zero-Covid demand growth official numbers. It works for a while, only for Opec Plus to come back with a counterpunch, or China to report even stronger growth numbers than what the West would want.
Oil has risen four of the last five sessions, as traders weigh in ground realities in physical solid market, where the imbalance continues. Inflation data in the US has offered room for the Fed to put at least a temporary halt to more monetary tightening. Inflation in China has also eased to near zero, raising hopes of policy stimulus by Chinese authorities to further spur demand. Supply disruptions in North America and Asia owing to varied reasons are also now being priced in – all working in favor of Brent crude gradually inching back towards $80/bbl.
Opec’s monthly outlook report is around the corner and should offer more insights into production cut compliance by member countries, and what is in store for the near future. India and China have both remained big buyers of Russian crude – as Russia’s oil exports have reached pre-war levels. India and China both have imported more oil from Russia than they did from Saudi Arabia – which is a first. This goes on to show Russia is more likely than ever to stick with Opec in the times to come – and be willing to comply with more production cuts, should that be deemed necessary.
For Pakistan, strength and stability in oil market is more bad news. Already at the brink on many fronts, elevated oil prices could well be the last straw, as the currency has depreciated further following the events of this week.
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