Editorial: Pyrrhic Victory Of The Oil Price Pincer
As talks between the Hellenic Republic and its creditors in the Eurozone collapsed on Sunday after less than an hour of deliberation, the global markets took a collective nosedive.
By June 30th, Greece will have to pay back four International Monetary Fund (IMF) loan repayments worth $1.8 billion. If this is not reached within the allotted time and a third bailout extension is not agreed, then the southeastern European state will default on the debt owed.
Greece will be the first Eurozone country to fail in its fiscal obligations and the consequences for the 16-year old monetary union will represent a frightening and unknown nest of consequences.
At the same time as a pan-European fiscal crisis looms at the heart of Europa, in the United States the International Energy Agency (IEA) has released a raft of statistics that point to further oil price woes. World oil supply has surpassed demand for more than a year now, making the current oil surplus the longest-lived since the "Asian Contagion" of 1997.
As OPEC shows precious little sign of abating its current production rate of 31.3 million barrels per day (bpd), the glut is set to become the most profound since the mid-1980s.
Should pumping levels remain unchanged, a swelling stockpile could be further expanded by the slackening of sanctions on Iran, enabling OPEC’s second biggest producer to inject a sizeable part of its 3.3 million bpd into the market. Add to that the fact that in May 2015, US oil output recently hit its highest point for 43 years, and there is a price pincer in effect squeezing an already strained hydrocarbon continuum.
As we see the Black Gold embattled by dual forces, we would do well remember that two-front wars are seldom anything but pyrrhic….
Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ
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