Oil Spoil Warning

While the global economy remains in a prolonged slump, oil prices are steadily moving up.

While the global economy remains in a prolonged slump, oil prices are steadily moving up.

It is understood that Opec, the cartel of oil supplying countries, is comfortable with a floor price of $70 a barrel. Russia is believed to be looking at a band of $70–90, to prop its sagging economy that hugely depends on oil. The cartel is betting on a strategy of production curtailment—using the lack of demand as a ruse—and hopes that a demand spike in the later part of the year, from a possible economic recovery, will drive prices back to the $100-a-barrel level. So, get ready for an inflated fuel bill if Opec’s ploy succeeds—and the Indian Government opts for market pricing for petrol. Opec’s is not a risk-free strategy, though. The oil futures market could be cornered by speculators betting on a price crash, and that could plunge oil back to the $50-a-barrel range. Either way, the global economy is in for a roller-coaster ride with oil volatility back in the reckoning.

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