Prices of oil dip underneath $80 due to multiple factors
The global oil market is currently experiencing a period of turbulence, with the oil price heading for its longest stretch of weekly losses this year. The decline in oil prices is being driven by a stronger dollar and "the aggressive tightening of monetary policy," according to commodity experts at Commerzbank.
The US dollar index is at an all-time high with 112 index points, due to the recent US interest rate hike. Other countries such as Britain, Norway, and South Africa have also raised interest rates, contributing to a stronger dollar and putting downward pressure on oil prices.
The current price of American WTI oil is $79.24, a decrease from $83.60 earlier today, while the current price of European Brent oil is $87.24, a decrease from $90.40 this morning.
OPEC may be forced to cut production if the oil price continues to fall. However, OPEC+ countries have indicated possible production increases following recent rumors, although there is still no official confirmation, and market observers are waiting for a statement from the cartel.
Nigeria's production is 850,000 barrels per day below its OPEC quota, with Nigerian production, which has recently fallen below 1 million barrels per day, currently braking. The International Energy Agency is skeptical about further production development in Nigeria due to insufficient investments.
The first survey-based estimates of OPEC production in September are likely to show that the supply situation has hardly changed. The global oil market is currently well-supplied, and these declines in Nigerian production would not change the market's good supply situation.
There could be further turbulence if there is a threat of a EU ban on Russian oil. The US Federal Reserve has signaled its readiness to tolerate a recession in the US as a trade-off for regaining control over inflation. Some banks are predicting a recovery for the oil price due to low inventories and sustained demand despite recession fears, with JPMorgan Chase forecasting a Brent oil price of $101 per barrel for the fourth quarter of 2022, and Goldman Sachs expecting $125.
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