Stock market depression affects oil prices

Between January 2016 and October 2018, the value of 1 barrel of Brent oil tripled to €86 per barrel. By the restless On the financial markets, the oil price fell to approximately €50 per barrel at the end of December. The rising trend started again the day after Christmas and will continue after New Year's Eve.

Unrest in financial markets
However, this does not mean that the unrest in the financial markets has disappeared. In fact, the AEX Index opened the new year at its lowest point in 2 years and the first trading week is going poorly. For example, investors are still concerned about the trade war between the United States (US) and China.

Also the uncertainty regarding the Proposed referendum on United Kingdom membership of the European Union causes headaches. In addition, the American central bank (Fed) has for this year 2 interest rate hikes announced. Analysts say these uncertainties are not new, but answers are taking too long to come. As a result, sentiment has turned since October.

The unrest in the financial markets is one of the reasons why the oil price has fallen sharply in value in a short time. After all, falling stock prices indicate a cooling economy and therefore the demand for oil is likely to decrease.

High production figures 
Another reason for this is the high production of shale oil in the US. US production recently reached a record volume of 11,7 million barrels per day. The so-called OPEC countries have also increased production in recent months, because it was expected that countries would not buy Iranian oil. This is as a result of the American sanctions against that country.

However, US President Donald Trump has made an exception for a number of countries (including Japan, South Korea and India). As a result, there is a surplus, while the unrest on the market reflects concerns about the global economy. As a result of falling oil prices, diesel prices at the pump have fallen by €0,15 since October to €1,362 per liter (January 4). 

Increasing trend?
Since Christmas, the oil price has rebounded (+€5 to €55 per barrel). One reason for this is that Saudi Arabia has announced that it will produce less oil. It is still difficult to say whether there is an increasing trend. This is due to the uncertainties in the financial markets.

There may soon be more clarity about the trade war, as an American delegation travels to China to discuss the conflict. It is now also clear that the trade war has negative consequences for both the Chinese and American economies. It is impossible to say whether the countries will also reach reconciliation. After all, previous attempts came to nothing.