RIYADH, Aug 13: With prices in the mid-60s range, oil markets are in turmoil of real magnitude. Issues, almost entirely un-related to the fundamentals of the oil markets and that are much beyond the control of Saudi Arabia and other oil producers, are immensely contributing to the current woes of the global energy markets.

Opec is now producing at their highest level in many, many decades. The cartel has already increased its production by 300,000 barrels a day to around 30.4 million barrels a day over the last two weeks or so. According to some, the current rise in crude oil process does not have any justification as there is enough oil to meet the oil demand. Even the Indian oil minister Mani Shankar Aiyar concedes: “The mindless speculation in crude oil prices in New York is the primary cause for this because there is absolutely nothing else that justifies such a rise in prices. It is indeed worrisome,” he emphasized during an interview with Bloomberg conceding there was a concern that supplies might get disrupted, ‘yet it was not a strong reason for the surge in prices to the current record levels.’

And thus for various reasons, despite the best of efforts of the oil producers, the bull-run continues. Crude prices are touching new heights. They are now on the verge of crossing the mid-60 range. And in the midst of all this the blame game continues. The industrialised world keeps on pointing fingers towards the producers for ‘not doing enough’ to rein in the rampaging prices.

Despite the temptation to have higher oil prices and thus increase the cash flow into their economies, the oil producers’ by and large have played a moderating game. Saudi Arabia did not allow the death of the monarch, King Fahd early August to result in any major havoc in the markets.

However, the announcement of the US government to close its embassies and consulates for two days last week definitely caused a major blow to the already itchy nerves of the market. Markets responded sharply. Then the US announcement was also joined by the Australians and the British governments. They warned their citizens in the Kingdom to be extra-cautious. The British announcements spoke of credible evidence that terrorists are in the final stage of planning. The Saudi government however, remained confident saying simply it had no credible information of any such terrorist plan. Yet the damage was done!

Oil markets reacted sharply, for any threat to oil infrastructure in Saudi Arabia is bound to have serious implications in the already precarious supply-demand balance.

What made these major governments make this announcement is difficult to judge at this stage. Analysts say such pronouncements are generally based on what the intelligence community often dubs as ‘credible chatter’.

However, there are some people say that such pronouncements are often made by the governments on the slightest pretexts, so as to be stay clear of insurance liabilities. This is more of a matter of ‘We said you so’. If this is indeed the case, and let me admit this is a big IF, then the governments need to reconsider their strategy because it adds to the woes of the already stretched energy markets.

The collapse of Iran and the EU nuclear talks was also affecting the markets and if the matter heats up, it would certainly affect oil supplies. Supply side concerns on this issue are definitely working on the market sentiments.

Again this issue is much beyond the oil producers’ control. Opec is not at all a political body, which could take up such geo-strategic issues.

Then at least 12 unplanned shut downs of refineries in the US during the last three weeks or so have also not helped the crude markets either. Again this is something which Saudi Arabia and other oil producers can’t control themselves. Major industrial economies also need to bring their own house too in order. The blame game will not help much longer.