The oil price has fallen this week. The price initially fell after hints from the US central bank that interest rates will not be lowered for the time being. Initially, the decline was limited, as US commercial oil reserves fell after the sharp increases in recent weeks. However, on Wednesday, May 15, the oil price took a significant step downwards, after the market became aware of a battle within Opec over the cartel's targets.
The oil price has fallen slightly this week. On Thursday, May 9, oil traded at $83,88 per barrel. Until Tuesday, May 14, the price fell to $81,81.
Overall, the oil market trend was down this week. The main reason for the decline is that the chairman of the US central bank, Jerome Powell, stated in the US media that he is no longer so sure about falling inflation in the United States. In the first quarter, some prices rose more than expected. This makes a reduction in interest rates less likely in the short term.
Meanwhile, a sharp drop in US oil reserves kept the decline fairly contained for most of the week. Extra attention was paid to the stored volumes, as stocks have risen sharply in recent weeks. For example, two weeks ago, commercial inventories increased by 9,1 million barrels. Last week, the market offset this build-up, removing 3,1 million barrels from inventories. That is significantly higher than the decline of 1,35 million barrels that market analysts expected in the latest Reuters survey.
OPEC countries are not keeping their agreements
In addition, there was considerable pressure on the oil price after it became known that the cartel had pumped 568.000 barrels per day more than agreed. The increased production creates optimism about global supply. In addition, Bloomberg writes that it is questionable whether the cartel's limits will last. The news agency's website shows that there are intense discussions within the cartel about the targets.
At least five of the 22 countries disagree on the organization's current direction. Anonymous sources indicate that the United Arab Emirates, Iraq, Kuwait and Algeria have expressed a desire to pump more oil. The countries believe that the attempt to raise oil prices has proven ineffective and believe they can earn more from larger export volumes. This is partly due to the growth of production outside the cartel, especially in the United States. To some extent this fits into a historical pattern. In general, the United Arab Emirates wants to produce more oil at a lower price, while Saudi Arabia prefers lower production at a higher price.
The diesel price has also taken a step back. On Friday, May 10, the price of 100 liters of diesel was €128,60. On Wednesday, May 15, the price had fallen to €127,22.