At the end of last year, the oil-producing countries united in OPEC reached an agreement to reduce their production. They wanted to reduce the supply of oil and thus drive up the price of black gold. The low oil price in recent years has hurt the oil-producing countries a lot, for example because a large part of government revenue in those countries comes from oil.
When, after the agreement was concluded, it turned out that some important non-OPEC countries such as Russia indicated that they would participate in the production cut, expectations soon arose that the oil price would indeed rise.
Op Boerenbusiness.nl, however, you could then read that the increase in the oil price was not guaranteed. We gave a few reasons for this, such as that we first had to see whether the OPEC countries would adhere to the self-imposed production limit. Past experiences in that area did not provide many reasons to be optimistic about this. The OPEC countries generally do not or hardly adhere to their production quotas and OPEC itself cannot control how much oil each country produces per day.
But even if OPEC members were to adhere to those quotas, an increase in the oil price would not be guaranteed. An important oil producer such as the United States would not be concerned about the agreements.
In fact, we argued at the time, the chance that the Americans would increase production was very high. In previous years, numerous US oil companies have stopped or sharply reduced oil production. This is in response to the low oil price. For many companies, the price of a barrel of oil was simply too low to make an acceptable profit or even so low that a loss was incurred.
But if the oil price were to rise as a result of the OPEC agreement, oil production would become profitable again for many of those companies and they would turn on the oil drilling rigs again. That would then lead to an increasing supply. The result would be that the oil price increase would be held back, creating a price ceiling, as it were, on that market.
This expectation has indeed come true. Figures from the American oil research company Baker Hughes show that the number of oil drilling rigs at the beginning of this month was 741, which is 200 more than at the beginning of February 2016. The number of drilling rigs in operation has not been as high as at the beginning of this month since the end of 2015. And the trend is also increasing. An increase can also be seen in Canada, where there is an increase of 130 compared to a year ago.
Indeed, oil prices have risen since the OPEC agreement from around $45 a barrel to around $56 today, which has been a strong enough increase for many US oil producers to ramp up production.
Because, as mentioned, this means an increasing supply of oil while demand does not seem to be picking up more strongly (because there is no spectacular increase in economic growth, but also because the winter in the Northern Hemisphere is almost over, which could lead to less demand), it would Don't be surprised if it is much more difficult for the oil price to climb higher in the coming months. In fact, we must take into account that on balance the oil price will not rise much further or may even fall slightly in the coming months. A drop back below $50 a barrel between now and the summer months would not be surprising.
Unfortunately, this does not mean that the price of diesel will not rise further or that it will fall in the coming months. The price is of course derived from the oil price, but from the oil price of a few months ago. This is in connection with the purchasing moment. What this could mean is that the price at the pump could even rise in the near future while the oil price on the market falls, because the diesel that will come onto the market in a few weeks is made from oil purchased a few months ago, when the oil price was higher. lay.
There should be no consequences for ECB policy. Yes, the oil price may fall somewhat, but as I have argued in the past, this will not reduce inflation in the eurozone - which the ECB should pay attention to - for the time being. This is determined by the oil price now compared to a year ago and in that comparison the oil price is considerably higher today, even if it were to fall in the coming months.
But I purposely write that there should be no consequences. Experience shows that the ECB will do everything it can to avoid creating expectations that the bank will have to raise interest rates and instead wants to keep the door open for an even looser policy.
This means that I would not be surprised if, if the oil price fell in the coming months, the bank would take the opportunity to open that door wider. The result: EURIBOR rates are more likely to fall further than to rise for the time being.