Positive and negative reports about the oil market have balanced each other out quite nicely this week. The Brent quotation therefore moved mainly sideways and players in the market remain hesitant for the time being. That while there are arguments for both a fall in the oil price and an increase.
The price of Brent crude has remained close to $110 a barrel all week. Monday, May 16, the price peaked at $114,24 a barrel and Wednesday, May 18, the Brent quote set its lowest price of the week: $109,18 a barrel. The market does not choose a direction, but mainly moves sideways. In recent days, the quotation for Brent oil has moved towards the peaks of the last few weeks.
An imminent EU boycott of Russian oil and the scaling down of the corona measures in China could drive up the oil price. That effect is not forthcoming due to concerns about economic growth and the measures taken by the US central bank and the signals it sends. Several analysts cite $120 a barrel as the provisional upper limit for the oil price. It is also warned that if the EU actually sets up a boycott and China withdraws all restrictions surrounding corona, that limit could be raised very quickly. This probability is not considered very high, however. A full European embargo on Russian oil does not seem likely due to fierce resistance from several member states. Shanghai residents are allowed to go to the supermarket for the first time in two months, but sources here do not expect all measures to be lifted and public life fully resumed in the short term.
Provisional equilibrium
A sharp fall in the oil price is also not in line with analysts' expectations. High inflation and rising interest rates are not favorable for economic growth. Although several economists warn of an impending recession, that does not necessarily mean that the demand for oil and therefore the price will fall. Some analysts are comparing with 1990 and 2001 and expect a 'soft landing' rather than a shock in the oil price as in 2007 (the credit crisis) or 2020 (corona crisis). A small drop in oil demand or slower growth could easily be absorbed, according to these analysts. The OPEC+ members are already having trouble fulfilling their quotas. The oil market is looking for a balance and seems to have found it for the time being.
In contrast to the stable price for crude oil, the diesel price has taken a step back. From €152,25 per 100 liters on Monday, the price has fallen to €146,37 per 100 liters today (Friday 20 May). That is the lowest price in a month. According to some experts, the lack of a boycott on Russian oil plays a role in the lower diesel price.