Oil prices are marginally down on Friday, however, heading for their biggest weekly gains since mid-December. Although the unrest in Kazakhstan and outages in Libya has spurred concerns over supply.
The global benchmark, the Brent crude is down 0.21%, currently trading $81.82 a barrel while the U.S. benchmark, the West Texas Intermediate (WTI) crude is down 0.55%, currently $79.02 a barrel, as of the time of this writing.
Brent and WTI are on track for gains of almost 5% in the first week of the year, with prices at their highest since late November, as supply concerns overtook worries that the rapid spread of the Omicron coronavirus variant might hurt demand.
What you should know about Kazakhstan
Kazakhstan is a Central Asian country and former Soviet republic, located between Russia and China. The country is also sharing borders with three other ex-Soviet republics and is regarded as the largest economy in Central Asia due to its rich hydrocarbon and metal deposits. The country has attracted hundreds of billions of dollars in foreign investment since becoming independent in 1991.
Strategically, the country links the Chinese market and South Asia with those of Russia and Europe by road, rail and a port on the Caspian Sea. It has described itself as the buckle in China’s huge ‘Belt and Road’ trade project.
Kazakhstan is one of the top global producers of uranium and it is the world’s ninth biggest oil exporter, producing some 85.7 million tonnes in 2021 and its 10th largest producer of coal.
The uprising began as protests in oil-rich western regions against the removal of state price caps on New Year’s Day for butane and propane, which are often referred to as ‘road fuels for the poor’ due to their low cost. The reform, aimed at easing oil shortages, quickly backfired as prices more than doubled. This caused the protest to spread, tapping into a wider sense of discontent over endemic state corruption, income inequality and economic hardships that have all been compounded by the coronavirus pandemic.
Even with the country being the richest of the Central Asian republics in per capita income, half of the population in Kazakhstan, the world’s ninth-largest country by territory, live in rural, often isolated communities with poor access to public services.
While the country’s vast natural resources have made a small elite incredibly wealthy, many ordinary Kazakhs feel left behind. About a million people out of a total population of 19 million are estimated to live below the poverty line.
What is happening in Kazakhstan?
Security forces appeared to be in control of the streets of Kazakhstan’s main city Almaty on Friday and the president said constitutional order had mostly been restored, a day after Russia sent troops to put down an uprising.
Oil production at Kazakhstan’s top field Tengiz was reduced yesterday, its operator, Chevron, explained that some contractors disrupted train lines in support of protests taking place across the central Asian country.
Other factors affecting the price of oil is the U.S. employment figures not living up to expectations. U.S. employment increased less than expected in December amid worker shortages, and job gains could remain moderate in the near term as spiralling COVID-19 infections disrupt economic activity.
Meanwhile, supply additions from the Organization of the Petroleum Exporting Countries and its allies (OPEC+), are not keeping up with demand growth. OPEC+’s output in December rose by 70,000 barrels per day from the previous month, versus the 253,000-bpd increase allowed under the OPEC+ supply deal which restored output slashed in 2020 when demand collapsed under COVID-19 lockdowns.
Production in Libya has dropped to 729,000 barrels per day from a high of 1.3 million bpd last year, partly due to pipeline maintenance work.
What they are saying
Rystad Energy analyst Louise Dickson stated, “The upward jump in oil prices mostly reflects the market jitters as unrest escalates in Kazakhstan and the political situation in Libya continues to deteriorate and sideline oil output.”
Commerzbank analyst Carsten Fritsch stated, “The concerns about a massive slump in oil demand have faded now that it has become clear that Omicron leads to milder forms of the disease than previous variants of the virus, meaning that massive mobility restrictions are not likely.”
Conclusion
The country is also the world’s second largest miner of bitcoin after the United States. Bitcoin’s hashrate, the measure of computing power of machines plugged into its network, dropped by over 10% on Wednesday after Kazakhstan’s internet was shut off, according to crypto mining firm BTC.com. This week’s unrest prompted an 8% jump in the price of the metal that fuels nuclear power plants.
