Crude oil prices which have been climbing up steadily, despite moves from top energy consuming nations to rationalize it, took a plunge in the weekend (November 26) as fears of a return of lockdown and economic slowdown loom around in global markets after a new variant of corona virus was detected in a few African countries and West Asia. The new variant is feared to be resistant to existing Covid vaccines.
The price of Brent, the benchmark crude variant, which was staying above $ 80 a barrel over the last couple of weeks, fell steeply by around $ 10 to $ 72.72. The West Texas Intermediate aka WTI too fell by over $ 10.
OPEC may have to rationalize prices
Market experts point out that the in face of new developments, the OPEC may have to think twice before summarily dismissing pleas of top oil consumers like the US, India and Japan to rationalize prices. Led by the US, top oil consumers had decided to release oil from their emergency reserves to prevent prices from skyrocketing. However, that didn’t bring down prices.
Speculations have been running rife in the market that prices would soon zoom to over $ 100 a barrel. However, if the fears of a slowdown could lead to a fall in demand, it could trigger panic and may eventually lead to a freefall of prices. So it is likely that the proposed meeting of the OPEC on December 2, won’t ignore consumers’ interests completely.
US oil production
Meanwhile, international media have reported that the oil rig count ,including the active rig count, in the oil and gas sector in the US has gone up hugely this year, which could point out to shale oil industry ramping up production in the coming days. The US shale companies which have been distributing the profits from high oil prices to share holders and paying back debts could restart capital expenditure in the near future if oil prices skyrocket. Saudi Arabia and Russia which now downplays the power of US shale oil to influence the market may be caught unawares, if the prices move up again.