| Oil price and politics in the Middle East |
The price of oil remains static despite the production cuts announced by Saudi Arabia, the world's top exporter of crude oil, recently. At present, it is far below where the Saudis want it to be, given the fact that that their breakeven price at present is above that of crude oil.
Production cuts mean low volume for sale and the Saudis were compelled to increase the price of oil for Asia that left the main consuming nations in the region in a state of flux; it was a knee-jerk reaction on the part of the Kingdom, indeed.
Having come to know that the impact of the production cuts on the crude oil markets was not as desirable as intended, the Saudis, then, declared that the the volume of sale for Asia will remain unchanged despite the output cut. It, however, is a case of shutting the stable door after the horse has bolted.
A belated move of this kind, however, will not change the existing dynamics of the oil markets: China and India, the world's top two oil importers have already turned towards Russia for their needs and there is no sign of a change, imminent or otherwise, in the status quo.
Russia, meanwhile, stubbornly maintains its data, production and sales, as a closely-guarded trade secret - for obvious reasons.
In a puzzling development, meanwhile, Centre for Research on Energy and Clean Air - CREA - a Finnish non-governmental agency, published a report to show how Russian oil has found a way back to the very countries that imposed heavy sanctions on Russian oil - in a perfectly legitimate way: it is not a case of breaking the rules; on the contrary, a smart way of exploring the veins and arteries of the great game of imports and exports that in turn appeared to have left those who were fond of the sanctions none the wiser.
The report named the cluster of nations involved in the game as 'laundromat'. They are China, India, UAE, Singapore and Turkey; these countries have bought Russian oil in great volumes and then launder into the very nations that publicly turned their back on Russian oil - as a finished product.
It is as if the Russian identity from oil had been erased by subjecting the latter to a severe form of refinement at the respective refineries!!
The numbers speak for themselves: The highest proportions of imported oil products into oil price cap coalition countries were during the last year are as follows: diesel (29%), jet fuel (23%) and gasoil (13%); the number of volumes, the report says, has gone up by 140%;
As far as the European nations are concerned, they have no choice other than turning to any source that can address their needs, even if it means experimenting with the flouting of the definition of the Russian oil.
Saudis have been aware of the long-winded supply route since the beginning of the war between Russia an Ukraine. That may be the reason that the Kingdom is insisting on absolute transparency as far as the members of the OPEC+ are concerned, when it comes to data of the members.
In another related development, the rumours about the revival of the JCPOA - Joint Comprehensive Plan of Action - also known as 2015 Iran nuclear deal, appear to be doing the rounds in the corridors of power - yet again.
The West and Iran signed the JCPOA deal in 2015, in order to lift the sanctions against the latter in return for the sanctions being lifted.
When President Trump came to power, however, he just single-handedly cancelled it in 2018, saying that Iran was pursuing nuclear weapons while using the JCPOA as a front; with the abrupt cancellation, not only were the allies left in a lurch, but also provided Iran with an impetus to enrich uranium even further, much to dismay of its Arab neighbors and the West.
With Arabs and Iranians in reconciliation mode - and the US influence being on the wane - the latter appears to be softened its stance on Iran, although both sides remain tight-lipped about a possible breakthrough.
If Iran is allowed to sell its oil, the supply side of the oil equitation is going to be strengthened at the expense of demand and the very equilibrium that certain producers try to maintain will be the first casualty.
If it develop into such a stage, the price of oil will go down even further and newly-revived, but centuries-old, alliances will be under tremendous strain to stay relevant, because oil is the commodity that has been the lifeline in the region for decades.
