Oil prices have been rising steadily since May after the US announced its decision to exit the Iran nuclear deal and re-impose tighter sanctions on Tehran’s oil exports. As Washington ratcheted up its rhetoric against waivers to key buyers of Iranian oil such as India and China, oil surged on fears of a looming supply shortfall.
Faced with high oil prices and the prospect of its negative impact on the mid-term elections, US President Donald Trump leaned on Saudi Arabia to use its influence as the defacto leader of OPEC and its budding ties with Moscow to persuade the grouping’s members and Russia to ramp up production.
As both Saudi Arabia and Russia pumped up the volume to near-record levels, Trump surprised the market by granting waivers to eight countries, which the market estimates will keep 1-1.4 million Iranian barrels flowing into the market a day. Around the same time, International Energy Agency and other organisations lowered oil demand and growth outlook as a fallout of high crude prices as well as the US-China trade war.
As oil tumbled, the rupee steadied against the dollar and fuel prices began pinching less at pumps. The combination gave the government a breather on oil import and subsidy bills, while depriving the opposition a campaign weapon against the Centre.
But OPEC could prove to be the spoilsport as it works on a production cut deal to avoid a looming supply glut, especially with US shale production rising to record levels.
Though Russia is still not fully on board, there is a general consensus among OPEC members to suck out 1-1.4 million barrels a day -- the quantity covered under waivers --through a production cut.
Saudi Arabia has already announced its intention to cut output by 50,000 barrels a day. It is already shipping less oil to the US.
This is as much to grab the Asia market space vacated by lower Iranian supplies as to influence a higher drawdown from the US strategic reserves and bolster market sentiment – and prices.
If the grouping agrees to the production cut at its December 6 meeting, it will once again start pinching Indian consumers and give the opposition a handle against the government just when the pitch for general elections will be at its highest.
Global benchmark Brent crude has been on a downhill journey since it four-year high of $86.74 a barrel on October 1 and trading over 20% lower than its November 2014 level.
On Monday, it gave up gains made on last Friday to trade at $65.72 in a volatile market.
from Times of India https://ift.tt/2FGpCjM
