There is a fine line in the oil market between too little supply of oil and too little demand for oil. In recent weeks, it was mainly the concern about disappointing economic growth and therefore a lower demand for oil that left a mark on the market. This week saw a turnaround and worries about tight supply took over in the market again.
The oil market is on the rise again. Last Friday, Brent crude closed at $103,61 a barrel. That has now risen to $110,20 a barrel today (Friday, July 29). The presentations of the quarterly figures of various oil companies largely determined the mood on the oil market.
The high oil price has certainly not harmed the oil companies. US market leaders Chevron and Exxon Mobile posted $2022 and $11,6 billion in profits in the second quarter of 17,9, respectively, the companies announced today (Friday, July 29). Those are record amounts. Shell released the quarterly figures a day earlier and made a profit of $11,5 billion in the second quarter. TotalEnergies also released its quarterly results on Thursday, which also did not disappoint with a profit of $5,8 billion. BP is the last of the five largest oil companies to release its quarterly figures next week.
Market remains tight
In the comments on the quarterly figures, the top executives of the oil companies are quite positive. The prevailing view is that demand for oil has still not fully recovered and that supply is tight. On the production side, oil companies are struggling to keep up with the demand for oil. According to various analysts, a rising crude oil price still poses a danger for companies. Because several refineries were shut down first by corona and later by the war in Ukraine, the margins for oil refining have risen sharply. Partly because of this, the profits of the oil companies have increased. If the price for crude oil continues to rise, this could in turn be at the expense of the increased margins in the processing of the oil.
The good results of the oil companies arouse resentment among various politicians and consumer organizations. Fuel prices soared to record highs earlier this month and businesses and consumers struggle to afford the high prices. Meanwhile, oil companies are taking full advantage of the tight market and are posting record profits. The oil companies disagree with that reading, pointing out that the high prices reflect a pick-up in fuel demand, geopolitical unrest and a lack of investment in the sector.
Limited capacity
The next OPEC+ meeting is scheduled for next week, August 3. It is hoped from the US that the cartel will decide to increase production quotas. Analysts warn that several countries are already struggling to fill the current production space. They point out that there has been insufficient investment in the existing and new oil fields and that production cannot be increased quickly as a result.
The diesel price, like the crude oil, also rose again this week. On Monday, the price for diesel was still at €148,06 per 100 liters. That rose to €153,54 per 100 liters yesterday. Today the price has dropped slightly but is still good at €152,62.