The price of oil is rising! What’s going on? Let’s look at the following chart. It shows the trend in the WTI oil price since last Friday evening. Last week there was the massive crash against China in the wake of new US tariffs. This week fears about further strong declines in demand caused oil to crash further, from over 55 to 50.50 Dollars. Since Wednesday afternoon the market has been on the rise again. But step by step. What is happening now?
IEA lowers demand outlook
The International Energy Agency (IEA), an OECD subsidiary, today published its monthly oil market report. The report lowered its outlook for oil demand in OECD countries. The demand outlook for 2019 and 2020 is reduced by 100,000 barrels per day. The IEA is also convinced that economic concerns on the oil market are currently much more important than geopolitics – which of course means the Iran conflict, which could push up oil prices at any time. But the IEA report as a whole seems to be less important on the oil market at the moment.
OPEC gives bulls hope for further rise in oil price
The very current story, which has been gaining more and more attention on the oil market since yesterday, is called OPEC. Simultaneously with the technical recovery in the oil price from Wednesday evening, comments from the OPEC environment began to catch the eye of observers. From Wednesday to Thursday night, Saudi statements were heard that all options were being considered to stop the further drop in the oil price. Puuhhhhhhhh? What is that about? Normally the Saudis never speak directly about the oil price. Oil Minister Al-Falih (the grey eminence of the global oil market) has been saying the same thing for years. What is important for him and OPEC is the level of oil inventories, but not the oil price. Now such an open statement about the oil price is a clear sign.
This will fuel hopes that OPEC and Russia will cut their production volumes even more than planned. And what else was added? Saudi statements that they want to keep their production below 10 million barrels a day in the coming months. The “luminary” of Arab oil reporting (let’s put it this way) Amena Bakr uses Mario Draghi’s quote (do everything necessary) to underline that OPEC is obviously willing to do much more in terms of production cuts. After all, they need a sharp rise in the price of oil for their own national budgets! From the UAE we hear that they will continue to support actions that help to balance the oil market. So, is OPEC bringing the big turnaround to the oil market? Or will the market move further down next week when Donald Trump has come up with new tariff atrocities? Since tonight, WTI oil has been able to increase another 55 Cents to 53.25 Dollar. Since Wednesday evening the price has already risen 2.75 Dollars from the low.