Osama Rizvi

Osama Rizvi

Independent economic analyst, Writer and Editor

I
n my last article I covered different prospects/facets that signaled towards the extension of an oil deal. Of late there are developments that not only serve as a testimony to the possibility of an extension but also its probable segue into the year 2018 (until March).

I
t has been a topsy-turvy story for the most traded and (politically and economically) significant commodity in the world. Welcome to the world of Crude Oil. Back in 2014 when the war between Sheikhs and Shale begun, Saudi Arabia deliberately balked to play the role of, what has been called, Swing Producer of the world. By refusing to turn off the taps Saudis envisaged a future that will, acting out of the principle of survival of the fittest, drive out high-cost producers (most importantly US Shale).

First Brexit, then Trump. The elections in Netherlands, recently, gave a breather to nationalism. But then the tide of nationalism bestrode the Middle-East. The victim was India. There were symptoms similar to the above victims. Like US and EU who want to be the champion of global trade and global diversification, India tries to imitate the same.

I
t has not been a happy story hitherto for oil markets as the prices continue to be under pressure. The recent inventory build-up of 5million barrels has once again made the total number of stock piles touching a historic high i.e. 533 million.

T
he oil markets have just received a long awaited yet unexpected jolt. “No one is yawning now”, as an article in New York Times puts it. The prices plunged 8pc in two days as the report from EIA department showed an inventory build-up of 8.2 million barrels rendering the total inventory at 528 million barrels, the highest in history. Before we move on there are few things to consider making sense of what is happening in the oil markets of-late. How did we get here?

I
nternational political observers were shocked by Brexit and then Donald Trump‘s US Presidential victory. These two events are potent enough to unnerve the contemporary global order: first, in matters relating to security and, second as to trade. By the end of next March, Theresa May will likely invoke Article 50 of the Lisbon treaty and the complex process of Britain’s divorce from the European Union (EU) begins.

O
f-late the monotonous oscillation of oil prices is making it difficult for writers and analysts to get any sense out of this whimsical trend. After the Vienna Oil deal in November 2016 and after the 21st January meeting between oil producers the oil prices have been moving up and down in the $50-$60 band.

I
t has been almost more than a week as Mr. Trump has stepped into the White House. These 7 days saw the fulfillment of few promises. The White House was ringing with Executive Orders. Repealing of Trans-Pacific Partnership, Sanctioning Keystone and Dakota pipelines and halting the flow of funds for organizations that support abortion. How can we forget The Mexican Wall?

E
IA recently reported that this year (2017) will see a highly volatile oil price. From 30th November to hitherto oil prices have seen a considerable upward trend. The prices have fluctuated at times due to the build-up in inventory and increase in the rig count, and at times when the wave of uncertainty swept across the markets---as it did in case of Libya and Iraq. Kuwait, Saudi Arabia and others have reported to be cutting their production as per the agreement.

A
mong political observers, there is a widespread notion that U.S. President-elect Donald Trump will inherit an economy in the best of shape. Inflation is down to historic and desirable levels, the unemployment rate stands at 4.9% and U.S. economic growth is better than expected. Moreover, observers can’t help but hear Mr. Trump’s boastful rhetoric as soon as he steps onto the bully pulpit. But as promising as the picture might seem, it will be very difficult to carry off his promise of ‘getting back our jobs’ in the long term.

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