The price of crude oil has taken a significant step back. Is this the end of the upward trend that has been going on for almost two years now? And the Treasury Department has implemented a landmark measure today (April 1). For the first time in existence, excise duties on fuel have been substantially reduced. This translates into a rapidly falling diesel price.
The listing of Brent crude oil has taken a significant step back this week. On Monday, March 28, the price closed at $109,89 a barrel, which is more than $10 lower than before the weekend. In the days that followed, the quote rose to $112,76 a barrel on Wednesday, March 30. That is the highest price of this week. Today the price has fallen to $104 a barrel.
The decline that started Monday was caused by a combination of factors. These include the 'corona lockdown' in Shanghai, the peace negotiations between Russia and Ukraine and the ceasefire between Saudi Arabia and Yemen. However, these three events still had too little momentum to hold the price down for a longer period of time and definitively reverse the uptrend.
Opec+ announced in its meeting on Thursday, March 31 that it would stick to the production schedule. That means the oil cartel will increase production by 432.000 barrels per day in May. According to the members, the market is basically healthy. There is consensus on the outlook that, according to OPEC+, is more or less balanced. The current high prices therefore have nothing to do with supply and demand, but are prompted by geopolitical developments.
Bargain hunters
Demand for Russian oil is shifting from Europe to Asia. That's what S&P Global Vice President Daniel Yergin expects, he told CNBC. "Many sanctions are imposed by the parties themselves," said the expert. "That ranges from people who no longer collect the oil and banks that do not give credit guarantees to shipowners who do not show up and ports that refuse the cargo from Russia." This causes problems for users and Russia itself. In order to get rid of the oil - and to bring in money - the latter country gives considerable discounts.
The above is attracting interest from major users in Asia, including China and India. India in particular could become an important player, because this country has so far imported little oil from Russia. “Five weeks ago I would have called Russia an energy superpower,” Yergin says. "I think it will remain a big player, but the power will be smaller." The CEO assumes that Europe will succeed in finding other suppliers.
For the longer term, some analysts think that the price peak is behind us. The upward trend started in April 2020 - after the low caused by the corona crisis. In the first half of March of this year, that upward trend was accelerated by panic over the war in Ukraine. But the sense of reality is back below and current prices are (given the fundamentals under the market) too high. Prices are now around the level of 2011 to 2014. Compared to that time, however, demand is much lower. Especially if the situation in Ukraine calms down more, the oil market could take rapid steps back, according to analysts.
Historic excise reduction
The diesel price has taken a significant step down. Monday, March 28, the price was €167,01 per 100 liters. That is today €144,65 per 100 litres. This is partly due to the falling oil price. At least as important is the excise duty reduction implemented by the Ministry of Finance. Approximately 25% of the diesel price consists of excise duties. €100 less excise duty is levied on 11,10 liters of diesel. A historical event. It has never happened before that the Dutch excise duties on fuel have been substantially reduced. In the past decades, at most, no inflation adjustment was applied.