Monday, October 3, 2022
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Oil: OPEC+ comes into play, but records a 7-month low

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Brent oil has moved these days between the desire for a rebound, experienced last Monday, and the reflected falls that come from further away than this month of August. It should be remembered that the reference price of a barrel of oil in Europe moved with cuts of more than 26% in the last quarter, far from its highs in March due to the fear of recession that the markets are experiencing and suffering. Even at lows of the last 7 months.

But that wish has not come true, because once again the barrel has lost the $100 mark as quickly as it touched it, and has even gone further away from it. The “culprit” of this improvement, far from changing the landscape, is called OPEC+. And although nothing new was expected from their monthly meeting, last Monday they decided, against forecasts, to increase their global oil production by 100,000 barrels per day in October.

Production forecast by OPEC+ after its last meeting
Production forecast by OPEC+ after its last meeting

And although the experts consider that it will not have a real impact on the market, these adjustments, which will not make a difference between supply and demand if they are aimed at something in particular: prices are falling as futures indicate and the oil cartel is raising slightly the production to defend the maintenance of the high prices that we pay in the market.

But the truth is that several factors continue to point to a drop in its price. And they are all interrelated in that spiral that leads us, especially in Europe, to consider a recession. The first is the lower demand that is expected: the drop in activity will reduce the amount of its use together with the high prices of this raw material. That lower consumption is already displayed.

Seasoned by interest rates, which, in order to control runaway and double-digit inflation, are being raised more and more aggressively, with no sign of stopping their escalation in the medium term. All this with a China in which there are once again closures in its Covid 0 policy and absolute control of the pandemic. And the imminence that has been pointed out for months in the return of a nuclear agreement with Iran that would return the production of 1 million barrels of crude oil a day to the market is also escaping.

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