The crude oil prices have generally been on an upswing in the last couple of months, though the prices are still lower than what was seen last year during this time. What has supported the crude oil prices are the US sanctions imposed on Iranian crude oil as well as Venezuelan blend. However, crude oil could sway either way going forward.
The bulls are banking on higher demand for heavier crude by the Asian refineries amid the sanctions, which could continue to pull up prices. And increased supply risks from countries like Nigeria, Libya, and Algeria could also support the upswing in prices. The bearish lot is talking of a change in Saudi Arabia’s decision to keep output low on US’s request in the upcoming OPEC meeting. An increase in output flows by the Kingdom could dip prices. Also, crude bears are pointing to a rise in stockpiles as the global oil giants, ExxonMobil and Chevron plan to increase their oil production sharply over the next five years.
Also a recent tweet by US President Donald Trump on crude oil prices getting too high is not a good sign for bulls as this has the OPEC and its allies under inspection. This could pacify any uproar in prices.
Meanwhile at home, the government of Pakistan taking advantage of high international crude oil prices increased the prices of petroleum products last week. Given the recent global price situation, the increase in petroleum product prices was inevitable as the federal government finds itself in a tight fiscal spot.
There is a lack of capacity to absorb the international crude oil price hike shock right now despite the fact that the government, in order increase revenue collection has not been passing on the entire benefit of lower oil prices in the previous months to the consumes. It is in a tough position where reducing sales tax and petroleum levy on POL products is not foreseeable in the near future, which could otherwise help ease domestic pump prices. And if bulls takeover bears in the global crude oil market, the burden on the domestic consumers would only grow further.
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