The price of crude oil has fallen consecutively in the past three weeks, hitting a new low at $104.04 during the Asian session today. During its session last week, the recent fall in crude oil prices caused the Organisation of the Petroleum Exporting Countries (OPEC) resolution to combat the rising oil prices. The OPEC nations held a meeting with ten other non-OPEC countries in the first week of June to discuss the possibilities of increasing oil production in non-OPEC countries. A request was also made for all members to explore alternative avenues to boost oil production in their countries and reduce dependence on Russian oil. Russia has been considered the primary cause of increasing oil prices.
Many countries have since heeded the call, which has resulted in increased oil production across the countries, especially in the non-OPEC countries.
The United States of America reduces reliance on Russian oil supply to Europe by increasing its oil production limit and releasing its strategic petroleum reserves of over 400 million barrels of oil. According to the economic report, the US strategic reserve has been projected to hit a 40 year low of over 358 million barrels of oil by October.
The US firms added oil and gas rigs last week to increase their production rate. The rig count increased drastically to 740 in June, which helped lower oil prices and returned prices to the pre-pandemic level.
OPEC will meet with twenty non-OPEC nation leaders on 30th June to discuss alternative methods of increasing oil production in their countries to avert low supplies.
To further achieve prolonged stability in oil prices in the long term, OPEC has agreed against the involvement of Russia.
Other factors that led to the fall in oil prices
Interest rate hike
The price of crude oil has been equally affected by the pressures from the interest rate hike from most countries, especially the US, Canada, Switzerland, and Europe. The increase in the dollar exchange rate has discounted crude oil prices.
Reduction in demand for the Russian oil
There has been a drastic reduction in the demand for the Russian natural gas flows into Europe. Most European countries now resorted to an alternative energy source and moved to buy from other countries, especially the US.
Increased Oil Production by the US government and release of strategic oil reserve
The US government has supplanted the dependency on the Russian oil supply through increased oil production and the release of its strategic petroleum reserves, holding over 400 million barrels of oil. According to the government projections for July, the US shale oil production is expected to rise by 143,000 BPD, approximately 8.912 million BPD.
