The oil price has taken a significant step down despite Israel's actions in Rafah. In particular, the news that Russia may be considering increasing production is creating downward momentum. In addition, US commercial oil inventories increased again.
The oil price has fallen further this week. On Thursday, May 2, oil traded at $83,67 per barrel. Since then, the price has fallen in fits and starts to $82,18.
This means that the oil price has reached its lowest level in two months. It is remarkable that geopolitical tensions in the Middle East are not providing an additional boost to the oil price. On Monday, May 6, Hamas agreed to a proposal from mediators Egypt and Qatar for a deal that would make a ceasefire possible. Israel rejected the proposal as many of their demands had not been met and instead initiated preliminary shelling of Rafah. Since then, Israel has intensified the bombing. In addition, the Israeli army has seized a border crossing between Egypt and Gaza.
Until now, every escalation of the situation in Gaza has caused oil prices to rise. There is fear that the war will spread to the rest of the Middle East, which could lead to problems with the export of oil via the Suez Canal. On Monday, the bombing of Rafah caused a further increase in the gas price, as exports from Qatar could also be at risk. One reason for the limited grip on the market could be that an anonymous source within the Israeli army told CNN that Israel is conducting a small operation for the time being.
Russia hints at greater supply
A more important reason for the decline is likely that Russia's Deputy Prime Minister Alexander Novak has hinted at a possible increase in Russian oil production. Various media have reported that Novak has urged the government to suspend the voluntary reduction in oil exports. The oil cartel will meet on Saturday, July 1, to determine their new policy. Since the winter of 2023, OPEC+ has applied a lower oil production target.
The cartel's members have agreed to cut production by 2,2 million barrels per day to raise oil prices. In addition, Saudi Arabia chose to voluntarily reduce its oil production by 1 million barrels per day. Russia decided to adjust its targets downwards by 0,5 million barrels per day. Novak denies that a possible increase in the targets is on the table. Analysts from several major banks, including Rabobank, indicate that they believe Novak. Still, the market seems to be anticipating an eventual rise as traders keep their hands on their purse strings.
American supplies
In addition, US oil reserves continue to increase. Last week, US commercial oil inventories grew by 0,5 million barrels. Two weeks ago 9,1 million barrels were stored each week. The reason for this is that fuel production is on the low side, while the oil price is falling. The market expected reserves to decline by 1,4 million barrels to offset last week's sharp increase.
{{dataviewSnapshot(52_1715171327)}}
The diesel price has fallen slightly this week. On Thursday, May 2, the trading price for 100 liters of diesel was €127,64. On Tuesday, May 7, the diesel price had fallen to €126,50 per 100 liters.