The price of oil has risen sharply this week. The main reason for this is the market's expectation that OPEC will not scale up its production. In addition, greater American oil consumption pushed up the oil price some more. However, a correction took place on Wednesday as the market shifted its focus to US interest rate policy.
After last week's trough, the oil price is recovering. On Wednesday, May 22, the oil price reached $81,36 per barrel. This is the latest level since February 24. On May 28, oil prices rose to $84,63 per barrel. This is the highest since April 29. On Wednesday, May 29, the price corrected again to $83,54.
This week, attention shifted from the weak global economy and American overproduction to the upcoming OPEC+ meeting. In recent weeks, discussions within the oil cartel about a higher target caused a price drop on the oil market. The market now agrees that higher production is unlikely, which has given prices an extra boost.
Analysts expect the production level of the major oil producing countries to remain the same. Analysts indicate that an increase in production would likely push oil prices below $80. This is especially unacceptable for leading member Saudi Arabia, as the Gulf state targets a level of around $100 per barrel. Although the price has risen sharply, the market expects the price to balance out at a slightly lower level. For example, Deutsche Bank expressed an expectation of $83 per barrel in the tail end of the second quarter.
Memorial Day
The fact that the price was slightly higher is mainly due to additional American demand. In the United States, additional people chose to fly home to their families for the long Memorial Day weekend. Analysts say people are often flying to family this weekend, which meant oil demand was about 4,8% higher than usual, according to Bloomberg reporting. The market expects that American oil consumption will remain high for the time being. In the summer the oil market picks up due to a greater demand for kerosene. This effect is particularly visible in the American market, as Americans often fly to their families.
Correction
On Wednesday, May 29, oil prices fell as traders expect the US central bank (Fed) to postpone lowering interest rates. Some analysts even expect that interest rates will not be adjusted downward until 2025. Last week, the minutes of the American central bank showed that several officials think it is unwise to lower interest rates, as various inflation indicators appear to be negative. Some officials even propose raising interest rates again, although this is not as expected.
Traders chose to bet on a decline at the level above $84, as the previously anticipated economic growth is likely to fail to materialize.
The diesel price follows the oil price with a slight delay. On Friday, May 24, the price of diesel fell to €126,55 per 100 liters. On Friday, May 29, this price rose again to €128,08.