For the first time in five weeks, the oil price has risen again. Although the weak economy continues to affect the market, the expectation that Saudi Arabia will produce less will lead to higher prices. In addition, a lower quotation of Russian oil actually puts pressure on the diesel price.
After falling at the end of last week, the oil price has recovered. On Thursday, November 23, the Brent price closed at €81,42 per barrel. The price reached its lowest point of the week on Monday, November 27, at €79,98. The price then took a big step up again, to €82,92 on Wednesday, November 29.
In terms of demand, the undertone in the oil market remains quite negative. The major economies are still struggling. This largely explains the falling price until Monday, November 27. In addition, oil demand in the United States once again lagged behind market expectations. In total, reserves shrank by 817.000 barrels, while analysts expected a contraction of around 2 million barrels.
The prisoner exchange in the conflict between Israel and Hamas also pushed the oil price down somewhat. The ceasefire is an indication that escalation of the conflict to the region is not obvious. This appears to reduce the chance of a possible boycott of the OPEC countries or a blockade of the Strait of Hormuz (through which Saudi oil is shipped).
OPEC +
Remarkably, the severe decline in recent weeks seems to be one of the main reasons for the regained momentum. Due to the low price, expectations are growing that OPEC+ will further restrict supply at the meeting on Thursday, November 30. Analysts expect Saudi Arabia to increase pressure on OPEC cartel members to agree to a joint production cut.
At the moment, Saudi Arabia and Russia are putting pressure on supply on their own. The Gulf state has lowered its targets by 1 million barrels per day, while Moscow is aiming for around 500.000 barrels less. It is expected that both countries will demand solidarity from the other producing countries.
In addition, the supply has come under pressure due to a storm in the Black Sea. The storm has halted exports of about two million barrels per day between Russia and Kazakhstan. To prevent accidents, the upload capacity of the Novorossiysk terminal and the Caspian Pipeline Consortium (CPC) has been shut down. Since Monday, November 27, production from Kazakhstan's largest oil field has fallen by as much as 56%.
Meanwhile, the price of diesel has actually fallen. On Thursday, November 23, diesel traded for €132,26 per 100 liters. On Wednesday, November 29, the price had dropped to €131,65. That shouldn't come as a complete surprise. On Sunday, September 26, Russia's Ural oil (the dominant type of oil for diesel) fell below the €60 price ceiling for the first time in a long time. Reuters data shows December contracts at around $58 and $59 per barrel.