The players in the oil market are giving quite contradictory signals. OPEC is hinting at a recession and therefore declining demand for oil in the coming months. Another influential party, the IEA, expects an increase in oil demand. This organization sees oil as a relatively affordable energy carrier in the current market.
The oil market is having difficulty choosing a direction. Last week the downward trend seemed to have begun, with Brent crude oil eventually falling to $94,12 per barrel. Yesterday (Thursday, August 11) this had risen again and Brent almost touched $100, but ultimately remained stuck at $99,60 per barrel.
The oil market is therefore left somewhat in a vacuum. On the one hand, the Energy Information Administration (EIA) inventory figures have made a deep impression on the market. That has taken the wind out of the sails of the bulls in the market. On the other hand, OPEC+ is chaining the bears in the market by reporting that the limits of spare capacity in terms of oil production are in sight.
Opposing views
Analysts' views vary widely on how the oil market will develop. The International Energy Agency (IEA) expects oil demand to increase further in the coming months. The IEA cites the very high gas prices as the reason for this. Where possible, major gas consumers are switching to cheaper oil. OPEC+ does not share that view and announced that the demand for oil is declining due to slower economic growth or even contraction. There may be an element of self-interest involved, some analysts warn. OPEC+ has been saying for a few months now that not much more extra oil can be pumped. By keeping the forecast for the development of oil demand on the low side, the cartel members do not have to expand production capacity much. The knife then cuts on both sides. If the demand for oil turns out to be higher, the price can make another step higher. If the forecast is correct or demand is even slightly lower, countries will not be tempted to pump more oil to maintain cash flow.
The diesel price clearly has less difficulty choosing a direction. On Monday, August 8, the diesel price was €139 per 100 liters. That is the lowest price since early March when the price exploded with the outbreak of war in Ukraine. In a steady upward movement, the diesel price has now risen to €145 per 100 liters.
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