The oil market has been thrown in all directions since the outbreak of the corona crisis and price fluctuations have only gotten worse since the Russian attack on Ukraine. That is a thorn in the side of Saudi Arabia, one of the largest oil-producing countries in the world. Oil market players are balancing between a tight supply of oil in the short term and a looming recession in the longer term.
The Brent crude oil listing has posted a significant gain this week. Yesterday (Thursday, August 25) the Brent quoted closed at $101,74 a barrel. Today the price has already fallen somewhat, while writing this article the price has dropped just below $100 per barrel.
The oil market remains very volatile. On Wednesday, the stock figures for oil and fuel were released in the US. The stock of crude oil was lower than a week earlier. In fact, a record amount of oil and fuel has been exported from the US. That gave the market some confidence that it might not be as easy as it sounds with the brake on economic growth and the impact that this has on oil demand. The positive mood has been dampened somewhat later this week by signals that progress is being made in nuclear negotiations with Iran. If it actually comes to an agreement, Iran would be able to sell oil more easily on the world market. Now it is dependent on a limited number of countries that do not participate in the Western oil boycott.
Speculation
The sharp price movements in the oil market are unfavorable for oil producers. At least that's what the Saudi prince and oil minister Abdulaziz bin Salman told Bloomberg on Monday. According to the prince, prices on the oil market are not determined by supply and demand on the physical oil market, but are increasingly determined by speculators in the futures market. Unsubstantiated stories about a drop in demand, recurring news about large volumes of oil that would come back on the market, embargoes and sanctions mean that the paper market is moving further and further away from the physical market. The prince probably deliberately hinted at a possible production limitation within OPEC in order to thwart the speculators. Last Tuesday, Reuters announced that, according to OPEC sources, scaling back oil production is not being seriously considered. With his interview, the prince did achieve a reaction in the market that he was against.