After a relatively large increase, the oil price fell this week. The decline started when China announced that its industry has contracted, but was extended by news of several economic blows from the United States. Despite the economic slump, the US Central Bank (FED) decided to raise them again this week.
At the end of last week, the oil price took another big step higher. Between Thursday April 27 and Friday April 28, the oil price rose by $2,11 to the highest point of the week. At this high of the week, Brent crude was trading at $80,33. Then the oil price started to fall. On May 3, the oil price was $72,27, a drop of no less than 10%. At the time of writing (Thursday, May 4), the oil price appears to be recovering slightly.
There is little sign of OPEC+'s lower production target, which came into effect on Monday, May 1. In early April, the oil cartel unexpectedly decided to cut production by 1,16 million barrels per day. The news came in as a bombshell, resulting in a 6% increase in the oil price at the time.
The fact that the oil price is nevertheless falling is the result of economic developments in both China and the US. Contrary to analyst expectations, the volume of industrial activity in China fell in April. This appears to have put a stop to the expected recovery of the Chinese economy after the corona lockdowns for the time being. The index for Chinese industrial activities fell from 51,9 to 49,2 points. A drop of no less than 5,2%, according to figures from the Chinese National Statistics Bureau.
The decline comes on top of earlier news of a smaller increase in industry value than analysts anticipated. While the Chinese economy grew by 5%, the value of Chinese industry increased by only 3,6%.
American news maintains decline
On Tuesday, May 2, news about the American economy added to the previous decline. For the third month in a row, the US labor market appears to be shrinking. Not only did the number of vacancies decrease, but the number of dismissals also increased sharply. The developments put further pressure on the American labor market. Investment bank Barclays told Reuters that this is exactly the development you expect in the preliminary stages of a recession.
A day later, the nervousness surrounding the American regional banking system appeared to have returned. Unrest arose when news emerged that PacWest Bancorp was considering its strategic positions. One of the bank's possible long-term plans is sales. The stock markets reacted strongly to the news. The regional bank's shares lost as much as 56% of their value on Wednesday.
On the same day, the US central bank further stoked recession fears. For the tenth time in just fourteen months, the Fed raised rates. Once again, this is an increase of 25 basis points, which makes borrowing even more difficult.
Meanwhile, concerns about lower diesel demand from the industry persist. On Thursday, April 27, diesel was trading for €112,55 per 100 liters. On Wednesday, May 3, the price had fallen to €108,68.