After a solid rally in Brent oil at the beginning of this week, the price has been flattening in recent days. The market remains tense. New sanctions against Russia seem to be over in the short term, but the current measures are leaving a strong mark on the oil market.
After a period in which the price of Brent oil mainly fell, the price has been on the rise again since March 17. On Wednesday (March 23), Brent crossed the $120 mark to close at $121,52 per barrel. The price has now lost some momentum, but still remains strong at $119,29 per barrel.
That could change due to the rocket attack on Friday evening by rebels from Yemen on an Aramco oil storage facility in Saudi Arabia. The Houthis, allied to Iran, announced that they would open a replenishment at the oil distribution center in Jeddah. Formula 1 fans probably saw the clouds of smoke passing by, as the storage facility is not far from the city circuit.
The fact that Brent has taken strong steps higher at the beginning of this week is largely attributed by analysts to the summit meetings that were on the agenda of world leaders. NATO, G7 and the EU met on Thursday. Ukraine was the focus and traders feared additional sanctions from Western countries, which would be more focused on Russia's energy sector. This has already been pre-sorted in the oil quotation. However, no additional sanctions have been imposed against Russia. That caused a small correction in the oil price yesterday and today.
OPEC
OPEC's monthly meeting is scheduled for next week. Several experts have already anticipated this and expect that the cartel will not increase production much in the coming months. OPEC seems convinced that production and demand are in balance. The current high prices are more a result of geopolitical developments than of shortages in the market.
Yet the market at least gives the impression that supply is tight. Some analysts look at production developments among non-OPEC members. With the current relatively high prices, it seems logical that countries that are not bound by production quotas will pump more oil. According to that group of analysts, the fact that this does not happen is a sign that there is little spare capacity in the market.