Brent crude is heading for the second week to close Friday lower than the stock market opened on Monday. As a result, the balance also turned this week to news that has a depressing effect on the oil price. One of the measures taken to calm down the oil market is the marketing of oil from strategic reserves. That can come back later like a boomerang, according to some experts.
On Monday, April 4, Brent crude closed at $107,84 per barrel. That price has fallen in a straight line this week. Today (April 8), Brent oil is quoted at $100,47 per barrel. This brings the price close to the level achieved in mid-March. If the downward trend continues to follow the pattern of the last two weeks, the price will return to the level before the Russian attack on Ukraine by the end of next week.
Although the war in Ukraine is far from over, the oil market gained momentum bearish news prevails. At first it seemed that Europe would impose new sanctions due to civilian deaths in Ukraine in territory occupied by the Russian military. The energy market is no longer taboo. But as is often the case, the soup is not eaten as hot as it is served. The European Union has agreed on a short-term embargo for coal, but the plans for oil and gas are less concrete. A further decline in Russian oil deliveries will continue to hang over the market as a real risk in the long term.
Additional oil
An important factor at the moment is that oil from strategic reserves is being brought onto the market. The United States will put 180 million barrels on the market in the next six months. President Biden is threatening fines for American oil companies that do not fully utilize their licensed production space. Other members of the International Energy Agency (IEA) have decided to release 60 million barrels. A total of 240 million additional barrels will come onto the market. Together with OPEC's production increase, this should cool the overheated market. Experts believe that this will only depress prices in the short term. In the longer term, countries want to rebuild their strategic stocks and then the strategy currently being implemented will be counterproductive.
The rising corona infections in China are putting further pressure on prices. Shanghai is in lockdown and given the infection rates, lockdowns in other areas cannot be ruled out. That leads to less demand for oil in China, which is the largest oil-importing country in the world. In the current tight market, all the disappointing demand provides more air. Speculators and investors also play a fairly large role in the falling price. Interest in oil as a safe haven has recently been quite high. The rising price attracted speculators who wanted to get in on the action. Then a relatively large amount of air was pumped into the market and now everything that calms down, that air runs out.
Diesel follows a different pattern
Last week's sharp price drop initially did not continue this week. Of course, a lower diesel price was caused by the historic excise duty reduction. But it is striking that the diesel price fell by almost €10 at the beginning of this week to €153,05 per 100 liters on Tuesday, April 5. Today (April 8) the price has dropped to €142,05 per 100 liters. This price also comes close to the price before the war. But as written, there is an excise duty reduction of €11,10 per 100 liters.