Oil prices have risen sharply this week. A firm move by Opec+ last Wednesday, October 5, cutting production by 2 million barrels, ended the fall in oil prices since late August. Russia in particular is now exerting pressure to further reduce production in order to compensate for the lower selling price of their past months. The result is a sharp rise in the diesel price.
OPEC+'s intervention had been hanging over the market all week. Due to increasing rumors, the oil price is on the rise this period. On Friday, September 30, the price of Brent oil reached its lowest point and cost a barrel $85,14. On Wednesday, October 5, the price rose to a high of $93,86. The increase of around 10% led to the highest level in three weeks.
The world watched the monthly meeting of Opec+ with anticipation. Since the end of last week there has been a lot of speculation about a possible decrease in production. Due to the weak economic situation and interest rate increases by Western central banks, the demand for oil is decreasing, resulting in a falling price. A small production cut of 100.000 barrels last December failed to reverse the trend.
The oil cartel decided to take tough action. Analysts expected 0,5 million to 1 million fewer barrels to be produced on a daily basis. But the intervention turned out to be bigger. Oil production is being cut by 2 million barrels, reducing global oil production by 2%. Since the corona pandemic, Opec has not intervened so hard. Goldman Sachs expects that the price increase will continue for a while. The investment banks revised their oil price forecast for the fourth quarter from $100 per barrel to $110 per barrel.
Yet not everyone seems convinced that prices will rise so sharply. Most countries that are members of the cartel appear unable to meet their production quotas and therefore hardly have to reduce production. Some analysts estimate that in practice the production decline will be limited to around 1 million barrels.
The long arm of Russia
Experts explain the production discount mainly as a response to Western measures against high energy prices. Specifically, the price ceiling and the impending import bans on Russian oil seem to be the motive for Opec+'s new strategy. In order to be able to sell all their oil despite Western sanctions, Russia sells its oil at heavy discounts. A price increase on the world market should compensate for these discounts.
But Russia is not only stoking the fiery oil market with production restrictions. After the announcement that, following the European Union's lead, the United States is also introducing a maximum price on Russian oil, Russian Energy Minister Alexander Novak issued a far-reaching statement in which he announced that Russia refuses to export oil to countries with a price ceiling.
The fact that it is becoming difficult to obtain Russian oil is reflected in the diesel price. On Monday, October 3, this price was at the lowest point of the week (€148,51). A day later the price started to rise considerably. On October 4, 100 liters of diesel cost €149,85, but two days later the price was already more than €10 higher at €160,54.