For almost 2 years now, the oil price has been moving between $40 and $55. That is about half the price in the summer of 2014. In recent weeks, it seems that the oil price wants to break out of this zone. Is a price hike on the horizon?
The price of black gold rose to almost $60 per barrel at the end of September, before falling again. But that decline was nothing to write home about. Signals have emerged in recent weeks indicating that oil prices may well rise above $60 per barrel.
Supply and demand will meet each other
OPEC, the association that brings together the major oil-producing countries, and the US Energy Agency have indicated that supply and demand will collide more quickly.
An important reason for the relatively low oil price was the fact that supply was much higher than demand. This could now push up a balance between supply and demand. The International Energy Agency also expects that the supply and demand for oil can be brought into balance fairly quickly.
Oil cannot be dragged on
I am not surprised that the demand for oil will rise again. After all, economic growth in important markets, such as the United States (US) and Europe, is clearly higher than a few years ago. Higher economic growth means more machines and cars, so the demand for oil increases.
Of course, supply usually increases with a higher price, or even with the expectation that the price will be higher. For some oil producers, the prospect of an oil price of $60 a barrel means that production will pay off again. This will bring more oil to the market.
If the oil price rises in the coming months, an increase in production can also be expected. This, in turn, will ensure that the price can drop again for a longer period of time.
Oil price higher on balance?
But given the expectations that OPEC and non-OPEC countries agreed earlier this year to maintain oil production cuts, it will not be surprising if the oil price ends up higher on balance. This is at intervals of some downward pressure.