- The Oil price aims for a firm footing above $70.00 after a significant fall on Friday.
- Russia-Ukraine peace would increase the flow of global oil supply, which would weaken its price.
- The OPEC is planning to postpone its planned monthly supply increase.
West Texas Intermediate (WTI), futures on NYMEX, bounces to near $70.44 in Monday’s European session after posting an over seven-week low around $70.00 on Friday. The outlook of the Oil price remains uncertain as investors seek more development in Russia-United States (US) talks for ending the war in Ukraine, which entered its fourth year on Monday.
Last week, the US agreed to hold more talks with Russia after having long discussions on a truce with Ukraine in Riyadh, without having Ukraine and the European Union (EU) on the table. The US government also said that President Donald Trump is expected to meet Russian leader Vladimir Putin by this month. Over that Ukrainian leader Volodymyr Zelenskiy clarified that any agreement without their consent won’t be acceptable.
Meanwhile, President Trump has accused the Ukrainian leader of starting the war. On that, Zelenskyy has said that he is willing to step down if Ukraine gets NATO membership.
More positive developments in Russia-US peace talks would be an unfavorable scenario for the Oil price. Europe and the US are expected to revoke their sanctions on Russia if it calls off war in Ukraine. Such a scenario would lead to an increase in the seaborne oil flows.
Meanwhile, investors will also focus on OPEC’s decision about whether it will increase its monthly supply, which are expected in April. Last week, Bloomberg reported that the OPEC is planning to delay its planned monthly supply increase.
Brent Crude Oil FAQs
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world’s internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of Brent Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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