The oil price is on fire: Brent pushed through the $60 per barrel threshold a month ago and early on Monday morning pierced the $70 level. It came back down to $69 per barrel midday CET on Monday morning. These are lofty heights, when only 11 months ago we saw WTI turn negative during that fatal day in April. Oil rose steadily after the OPEC+ alliance of Organization of the Petroleum Exporting Countries and 10 additional nations decided to keep production cuts in place, save a small 150,000 barrels per day (bpd) combined increase from Russia and Kazakhstan. Saudi Arabia also left its voluntary extra cut of 1 million bpd in place for the time being. Together, the cuts amount to around 7.8 million bpd. The latest overnight jump came after Houthi drones hit Saudi Arabia’s Ras Tanura export terminal, which, with a capacity of 6.5 million bpd, is the world’s largest export facility. Saudi authorities said that oil production was not impacted. This is why the price of Brent only went up by 2.9 percent in the small hours of the Asian morning hitting $71.38 at the apex, quickly coming down afterwards. Compare that with the 15 percent hike after the attacks on Khurais and Abqaiq in the autumn of 2019; still, oil traders and analysts will watch the security situation closely. Brent is up more than 10 percent since March 2, days before the March 4 ministerial meetings. The interpretations differ depending on geography and outlook. The US fears inflationary pressures, especially as the $1.9 trillion COVID-19 Relief Bill could push US gross domestic product growth above 7 percent this year. Europe fears that higher oil prices could dampen economic recovery in an area which has experienced further lockdowns and an extremely slow rollout of vaccination programs. Asia is powering ahead as the latest Chinese export numbers indicate. Asian refining margins are getting ever thinner the higher the oil price. China, in particular, has shored up on crude inventories while the price was low. For Gulf Cooperation Council (GCC) economies, these price levels are really significant, because they will allow for budgets to be balanced again. While fiscal discipline and balanced budgets are always a good thing, they matter even more on the Arabian peninsula than elsewhere. Several GCC economies have embarked on ambitious programs to wean their economies off overdependence on oil. Saudi Vision 2030 is probably the most ambitious amongst these policies. The more budgets are balanced, the more money is available to invest in these massive economic reengineering projects. Needless to say, the higher the oil price, the better it is for the bottom lines of the region’s national oil companies. Developing new sectors will necessitate major investments, which is where a profitable oil company and a balanced budget will do wonders. The Kingdom’s Public Investment Fund will play a major role in these developments, which means that the fact that ARAMCO dividends are underpinned by the oil price developments above and beyond the promise of the company can be viewed as helpful. Europe fears that higher oil prices could dampen economic recovery in an area which has experienced further lockdowns and an extremely slow rollout of vaccination programs. Cornelia Meyer Looking forward, OPEC+ will need to decide on April 1 at their next ministerial meeting where they see oil markets going. Draining the still substantial inventory overhang is one consideration. In the medium term, GCC economies don’t want to see the global economy overheating. Inflationary pressures would not help the airline, travel and tourism industries, which already play a major role in the UAE and are set to grow substantially in the Kingdom. The words of caution by Saudi Energy Minister Prince Abdul Aziz bin Salman not to take economic recovery for granted are well heeded, especially as Europe seems incapable of escaping lockdowns. In that sense, Goldman Sachs may have slightly got ahead of itself when predicting that oil prices would reach $80 per barrel for Q3 2021. We are still several months away from then and, looking at Europe, plain sailing may yet prove elusive. Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources. Twitter: @MeyerResources Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view