Yesterday the price of oil saw higher levels of volatility and two main trends. In the Asian session and early European Session oil prices saw a strong and sudden decline, mainly caused by the OPEC members. However, the decline lost momentum and corrected upwards to a higher price when compared to the market open.
This morning, the price is seeing a slight decline with little momentum, however, even with the decline the price of oil currently remains above the previous day’s market price open.
The decline in prices was caused by reports from the market that Saudi Arabia and other OPEC countries are ready to increase production in the event of a significant drop in production from Russia due to economic sanctions. Towards the end of the day the group confirmed that there would be an increase in supply coming from OPEC.
The oil prices declined as the market was now expecting a significant increase in supply. However, OPEC members have confirmed that they are currently willing to increase supply by 200,000 barrels per day which is much lower than expected.
As a result, the price climbed again as the market experts reported that the OPEC group may not have the capacity at the moment to fulfill the market’s demands to an extent where prices can come back down. The report was originally released by Bloomberg, who also advised that the US President would visit Saudi Arabia to discuss the issue further.
The price is deemed to be influenced by the EU ban on Russian oil which can further stretch an already stretched supply. Though, according to JPMorgan Chase & Co. and Reuters, Russian oil companies will be able to redirect their flows to other consumers in the future, so a serious shortage of energy in the market may not be a reality in the longer term. Traders should still be vigilant for any new developments and changes in the trend.
The price has also been supported by the partial reopening of the Chinese economy. For example, Shanghai lifted some of its lockdown measures over the past 48 hours. As citizens travel and economic activity increases there is also an increase in demand which can potentially be positive for the price.
Today the price has declined by 0.48%, but is up this week by 1.34%. Throughout the day the market will continue monitoring further developments regarding the Russian oil ban, the increased OPEC supply and also the US employment figures. The NFP report, along with the unemployment rate, could indicate whether the employment sector is performing well or declining, which can also affect the demand for oil.
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