OIL AT $70: A GOOD POINT OF BALANCE?

With oil prices hovering at a 3 year high, the question that everyone has on his or her mind is where are the prices headed from here on? While the fundamental and technical analysts may have differing opinion on the same but if the price sustains around current level will be a very good point of balance between the money and power hungry nations.

Ever since US has gone big on shale oil, the oil producing majors comprising the OPEC (Organization of Petroleum Exporting Countries) have had a tough task of keeping the oil prices tied up in a leash. The cartel has kept the production low for many months now. The same had to be done to keep the US production of shale oil low and maintain its own monopoly.

Now, a mix of factors led to a rise in crude oil prices in 2017- rising demand, production cuts etc. Now, with crude at $70, in a way it’s a point of truce/point of harmony between US and OPEC nations.

US President Donald Trump visited OPEC leader Saudi few months back and it seemed to be a cordial one as far as oil prices is concerned. The Saudi Prince has a big focus on modernizing the Saudi economy, expanding and looking beyond oil, and not to forget the Saudi Aramco IPO. Now, if the prices stay at current level, both the sides should be in a happy state. US can produce its shale at the current price and OPEC nations, some of whom were bleeding earlier due to low oil prices, can improve their economy.

As it is, OPEC cannot control the prices for too long. And not that US will not invent technologies to drill shale at cheaper prices. Oil at $70 can keep these two world economies in a balanced state and probably could put an end to several long drawn geopolitical issues.