We told you so: Riyadh has calmed the oil markets
Saudi Arabia and its allies including the United States and the UAE have promised to plug any shortfall in oil.
As I write this column at 7:00pm on Tuesday (way after my deadline, by the way), the oil markets are a sea of red (that's a good thing, really, for several reasons). A barrel of Brent is hovering at $63.5 while WTI Crude is just a little above $59 a barrel, both variants down more than 6 per cent over Monday. That's the calming effect that Saudi Arabia has on the oil markets, despite 5.7 million barrels a day of its supply going off the market in the proverbial blink of an eye over the weekend.
The oil price, which witnessed its biggest one-day jump in almost two decades on Monday, was expecting a positive statement from Saudi Arabia about the restoration of its output to near pre-strike levels within weeks. The sharp decline in oil prices on just that expectation is a slap on the face of the perpetrators of the missile (not drone) strike on Saudi oil infrastructure as they failed in their mission to upset the energy ecosystem by hitting at the world's largest oil installation. Saudi Arabia and its allies including the United States and the UAE have promised to plug any shortfall in oil and meet the demand and have successfully arrested the spike.
The soothing effect that Saudi Arabia has had on the oil markets once again vindicates its leadership position despite shale oil's supposed reshaping of the industry's landscape. It also underlines the kingdom's readiness to meet and beat any such misadventure. Once the oil markets settle for good, it will be the perfect time to identify and collectively punish the perpetrators of this weekend attack, targeted as it was at every oil consumer in the world. This is not something that the world should forget in a hurry, for that will be a grave mistake. It is time to rid the Arabian Gulf of all destabilising influences and work towards a peaceful and prosperous future for the region.