The ministers of the OPEC+ countries are meeting today to make a decision on oil production in October. Analysts expect that price to remain the same, but Saudi Arabia recently hinted at a possible production cut to boost falling oil prices.
While the gas price, apart from the decline last week, has been rising for weeks, the oil price has been experiencing a decline for months. While in June about 120 dollars had to be paid for one barrel of oil, that price is now around 100 dollars. There are various reasons for this, says energy expert Aad Correljé of TU Delft. “Due to corona lockdowns, there is little demand from China. Furthermore, global inflation is also reducing demand for oil, while Iran may also return to the oil market.’
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Uncertainty also plays a major role. ‘We are currently working with many different prices’, says Correljé. Since the outbreak of the war between Russia and Ukraine, Europe has put caps on the price of Russian oil. And furthermore, Russia also sells oil to Asia at a reduced rate. Those different prices and currents create uncertainty.’
The G7 countries last week agreed to a plan to cap prices for Russian oil. With the introduction of this maximum price, the major industrialized countries want to ensure that Moscow earns less from the sale of fossil fuels, which would make it less able to finance its war in Ukraine. The price cap should apply from December 5. That is also the moment that Europe also bans Russian oil.
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But, will the price go up?
Oil prices are now rising after rumors that the countries of the oil cartel OPEC and its allies (OPEC+), including Russia, may decide later today to limit production. The probability of this seems difficult to predict, says Correljé. “I think in the current context it is difficult to sell to force a price increase by reducing production. But, it’s hard to predict.’
A barrel of American oil is 2.2 percent more expensive pre-market at $88.74. For Brent oil, 2.5 percent more has to be paid at $ 95.31 per barrel. A week earlier, oil prices fell sharply. Crude oil has fallen in price by about a quarter since early June due to the slowdown in the global economy and central banks raising interest rates. This wiped out previous gains from the Russian invasion of Ukraine.