Oil prices is once again all set to rise owing to the multiple factors such as disruption in oil production in Nigeria, oil production cut by OPEC, increased demand of oil during winters and troubled Middle-East. Under these circumstances speculations are high that the oil prices may rise in coming weeks. And if the oil prices plunge to a new high the developing economies will come under immense financial pressure and consequently to a slower growth rate.
Crude oil has recently rose when Eni SpA a halted delivery of 60,000 barrels of oil a day from Nigeria due to frequent attack by militants. Eni, Europe’s fourth largest oil company was compelled to declare force majuere as it was unable to make deliveries. However, analysts have argued that inventories are likely to fall due to increased consumption and consequently giving a fillip to price rise.
On the other hand, OPEC member have been agreed to cut production 1.2 million barrels per day in order to check the sliding prices. And if the decision is formally taken in the coming meeting of the OPEC the prices are bound to shot up. Moreover, market is already skeptical to this fact and has been pressurizing the prices to increase.
Furthermore, Iraq, seventh largest oil producer in OPEC, is struggling to settle down with increased violence, which pulled oil prices even higher. Apparently, there is a visible threat to oil production and supply due to increased violence and ethnic strife. Fuelling the crisis even further, Iraqi oil fields is under tremendous pressure for the latest technology and investment and these investments are very unlikely in such a situation.
These recent developments in the oil sectors will have far reaching effect on developing economies which is yet struggling to cope up with the oil price fluctuations. Recently, Indian finance minister P. Chidambaram has rightly pointed out that there is a persisting need of fixing a price band assuring producers that prices will not come down from a certain level and in turn, producers should assure that prices will not rise above a certain level.
