Professor Fred Singer of the University of Virginia recently said: “Oil is the single most important commodity purchased today, and its price influences the fortunes of every nation on the planet in significant ways. Yet nobody can tell you with honesty that they know where the price is headed.”

This is particularly true when watching the oil market in the last three months and illustrates the difficulties in explaining its intricacies, particularly with the wide swings of almost $20 (Dh73) a barrel.

The Opec Reference Basket (Orb) of crude oils was at almost $115 a barrel, the highest this year, around the middle of February. But a precipitous decline brought it to $106 a barrel by the first week of March. After some relative stability for the rest of the month, prices declined again to the lowest this year of just over $96 a barrel on April 18 only to fluctuate towards a slow recovery of nearly $101 a barrel now.

Such wide variations are difficult to attribute to one or two factors impacting the market, with the latest Opec Oil Market Report noting that “a vulnerable global economy combined with the prospect of moderate demand growth, rising crude production and high stocks sent prices tumbling.”

There are other reasons, such as the early expectation of the seasonal decline in demand during the second quarter of the year, when many refineries schedule their maintenance and reduce oil purchases. The strength of the dollar against other currencies is another reason that affected not only oil but most commodities including gold and silver.

The world economy is forecast to grow at 3.2 per cent after 3 per cent in 2012. The IMF’s most recent World Economic Outlook reduced its forecast for 2013 to 3.3 per cent from a 4.1 per cent forecast a year ago, where the continued decline in the Eurozone and the slowdown in some Asian economies and Russia are affecting expectations. Even the expected improvement in the US economy — as judged by the progress in the labour market — is now eclipsed by new signs of slower growth going by slipping factory activity and falling home construction starts.

Leading forecasting agencies now see modest oil demand growth of around 0.8 million barrels a day (mbd) in 2013 compared to 2012, while non-Opec supplies may rise by over 1 mbd. The demand numbers are driven by the growth in the countries outside the Organisation for Economic Co-operation and Development (OECD), especially in Asia and the Middle East, against a contraction in almost all the industrial countries, particularly in Europe. Obviously, non-Opec supply numbers are influenced by the rise in US production and Opec natural gas liquids more than anything else.

Therefore, requirements from Opec are forecast to decline to 29.8 mbd in 2013 compared to 30.2 mbd in 2012. But Opec production in 2012 was, according to IT, higher by almost 0.9 mbd, which explains the high level of stocks around the world, especially in the industrial countries.

Opec production is now at least 0.5 mbd higher than the production ceiling set by IT. But with average price so far this year at $106.55 a barrel, Opec is not expected to alter this level at its meeting later this month. There will certainly be a call for member countries to abide by their commitment to the above level. Discussing any substantial changes is unlikely and may be counter-productive.

This is particularly indicated as the US Energy Information Administration expects that the Brent crude oil price will average $104 per barrel over the second-half of 2013, a level that Opec would feel comfortable with.

Leaving all this aside, the most dramatic thing that happened in the oil market recently is none other than the European Union investigation into possible price-fixing in the oil markets. Offices of major oil companies such as BP, Shell and Statoil, as well as the price reporting publication Platts, were raided to collect evidence and the companies confirmed they were being investigated for, what the media says, is colluding “in reporting distorted prices”.

The probe is said to go back to 2002 and covers not just crude oil but oil and petrochemical products. It may take years for conclusions from this investigation to emerge but there are already calls for tougher regulations on trading and price reporting.

Assessment of prices by specialised publications such as Platts are supposed to bring transparency into the oil market and almost all oil producers depend on them in pricing their oil and products. Therefore, the negative side of this investigation could be a loss of confidence in the process of price reporting at a time when the market unfortunately does not have any other mechanism.