Oil price again under downward pressure

The oil price, which was around $45 per barrel in November, shot up to around $55 per barrel. However, that increase did not mean that the oil price would rise further or even remain at that level. OPEC has an extremely poor track record when it comes to adhering to the production agreements of its contiguous countries. We described that in a previous article even though. They always produce more than the quota allows.

Oil supplies have increased significantly
In addition, oil reserves in America have also increased significantly in recent times. That stock, with a total of 533 million barrels of oil stored in the US, is at the highest level ever.

That is important for the oil price. Oil traders know that, if the price rises, the Americans can use their strategic reserves and thus push the oil price down through more supply on the market.

It is not only OPEC countries that market oil
Another reason why an increase was certainly not guaranteed is that it is not only OPEC countries that put the oil on the market. More than half of oil production now comes from other countries, outside the OPEC countries. The increase in oil production is especially prominent in the US, thanks to shale oil. 

These factors have ensured that the price of black gold has stopped after the initial increase from 45 to 55 dollars. In the first quarter of this year, the oil price fluctuated between $53 and $56 per barrel.

Oil producers doubling
In the US, encouraged by the rise in oil prices in December, the number of oil producers has doubled in less than one year. With the exception of one week, the number has increased every week this year. This is evident from the data that the Baker Hughes company keeps. 

Falling prices
In recent weeks, the oil price has broken out of the narrow range mentioned and at the bottom. The price dropped to $50 per barrel. Is that a harbinger of a further decline in the coming months?

Experts believe that oil production in the US will continue to rise for the time being. The oil price is still favorable for many companies. This will only come into play at a price of $45 or less per barrel. Continued downward pressure can therefore be expected from that angle. 

Honour existing commitments
Another factor is whether the OPEC countries will continue their agreement to reduce production. However, that may become an unimportant factor in the whole. 

If the OPEC countries agree to maintain lower production levels or even reduce them further, this could boost the oil price for a while. However, it is also expected that other non-OPEC countries will further increase their production to benefit from the higher oil price. That fact could actually push the oil price down again. 

If the OPEC countries do not extend their agreements, this could also push down the oil price. In short, it could be that, regardless of what OPEC decides, the oil price will not rise significantly and for a long time. 

Cars are important
The demand for oil in America is largely dependent on the number of cars driving in the US and how many kilometers the American drives on average. The latter mainly depends on the number of Americans who have a job. Low unemployment means that there are many people who have to travel a long distance from their home to work. 

Unemployment in America is currently slightly lower, around 4 percent, than it was before the crisis. The number of kilometers driven increased every month in 2016.

Confidence has increased
This low unemployment has ensured that confidence among Americans has increased significantly in recent months. Based on this, many Americans decided to purchase a new car. These have often also been guzzling SUVs, because petrol and diesel were cheap.

The number of SUVs sold rose to an all-time record in one year. This also applies to the sale of light trucks.

Number of kilometers will increase further
Looking at the above together, this means that mileage in the US will increase even further in the coming months. The demand for fuel will also increase sharply. This is due to the increasing number of kilometers driven, but also due to the cars that Americans drive. 

Add to that the fact that summer is coming. That means millions of air conditioners in America are put to work full-time. Therefore, it is not difficult to imagine that the demand for oil could increase significantly. 

Enough to boost the price?
However, the question remains whether that demand can affect the oil price. As mentioned, it is expected that production will increase and if the need is great, the US government can always draw on the historically high oil reserves. 

It will not only be the oil traders, but also a party such as the European Central Bank (ECB), who will continue to watch developments in the oil market with suspicion. Will the oil price remain stable or will it fall again? That could be a reason for the ECB to buy up government bonds from the euro countries. They could continue this in 2018, because the bank can judge whether the danger of rising inflation is decreasing. 

This would ensure that the official interest rate, and therefore also the Euribor rates, remain historically low for even longer.