1. Current oil prices
Oil prices have shown volatility in recent months. Currently, the price of North Sea Brent crude oil is around USD 85 to 90 per barrel, while the price of US WTI crude oil is in the range of USD 80 to 85 per barrel. This development reflects several key factors, including the OPEC+ decision, macroeconomic trends in the world’s major economies and geopolitical events affecting oil supply and demand.
2. The main factors influencing the oil price
(a) OPEC+ decisions and production quotas
One of the most important factors for oil price stability is the decision-making of OPEC+ (Organisation of Petroleum Exporting Countries and its allies). This organisation decides on production quotas, which have a direct impact on global oil supply. In 2023, OPEC+ announced a decision to limit production, which led to a temporary increase in oil market prices. Production curbs are seen as a tool to help stabilise the oil price and ensure a balance between supply and demand.
(b) Macroeconomic uncertainty
Developments in key world economies, notably the US and China, have a major impact on oil demand. The US is the largest consumer of oil in the world, while China is the largest importer. Slowing economies, lower industrial production or reduced energy consumption in these countries may lead to a decline in oil demand and thus to a fall in oil prices. Conversely, economic growth and rising consumption can support price increases.
c) Geopolitical factors
Geopolitical events, particularly in oil-producing regions, have an immediate and significant impact on oil prices. Conflicts, political instability and changes in oil policies in key oil producing countries (such as Saudi Arabia, Iraq, Iran and Russia) may raise concerns about oil supply shortages. Tensions in these regions often lead to price fluctuations due to uncertainty about future supply stability.
d) Strong dollar
Oil is traded in US dollars, which means that a stronger dollar can push the price of oil down relative to other currencies. When the dollar strengthens, the oil market can experience a lower price in other currencies, which can affect global oil demand.
3. Macroeconomic data affecting the price of oil
a) Economic growth
Oil demand is strongly linked to economic growth in key countries. The US, China and Europe are the main centres of global demand. The growth of these economies typically leads to higher oil consumption in industrial production, transport and energy. Conversely, economic slowdowns or recessions can mean a fall in demand for oil and therefore a fall in its price.
(b) Interest rates and monetary policy
Central bank interest rates, particularly the Fed in the US and the ECB in Europe, have a direct impact on the stability of the oil price. Higher interest rates usually mean a stronger dollar, which can reduce the price of oil. Loose monetary policy, on the other hand, can increase demand for commodities, including oil, as lower rates provide cheaper financing for consumers and investors.
(c) Inflation
High inflation, particularly in the US and Europe, can lead to greater demand for commodities, including oil, as a tool to protect against inflation. In addition, rising production and transportation costs may lead to higher oil prices as extraction and distribution costs rise.
d) OPEC+ and mining decisions
Finally, OPEC+ decisions on adjustments to production quotas are still a key factor in price developments. Decisions to limit or increase production can affect global oil supply and hence the price of oil. This factor is one of the most important for oil price stability and growth.
4. Outlook for the future
Demand for oil continues to grow, especially in developing countries where automobile use and industrialisation are increasing. However, with increasing investment in alternative energies and electro-mobility, it is expected that long-term dependence on fossil fuels will gradually begin to decline. In the short term, price volatility can be expected, influenced by economic cycles, geopolitical factors and OPEC+ decisions.
