The oil price nearly took a nosedive in the past week. In a few days, Brent lost over $12 a barrel. Disappointing demand from China and possible additional supply of oil from Iran have left their mark on the market.
The price of Brent crude oil rose to $104,91 per barrel at the beginning of this week. That is the highest price in a month. However, the price spike has proven to be short-lived. The price soon fell back below $100 per barrel. Yesterday (Thursday, September 1) the price reached its current lowest point at $92,26 per barrel.
Two factors that weigh heavily on the oil market stand out this week. A deal with Iran over the country's nuclear program seemed within reach. At least that news was reported by an Iranian news channel that quoted a source within the International Atomic Energy Agency. This was later debunked by an anonymous source affiliated with one of the negotiating member states. French President Macron hinted that a deal is close, he hopes that the 2015 deal that was suspended by Trump will soon be resumed. Resuming the deal would mean that Iranian oil will find its way onto the world market more easily again. Israel is one of the fiercest opponents of an agreement because Israelis fear that by allowing nuclear energy to be used in Iran to generate energy, there is a chance that Iran will secretly develop a nuclear weapon.
Corona
Another old acquaintance has also returned after never having been away: concerns about corona. China continues to insist on keeping its society absolutely free of the virus. In Chengdu province - a metropolitan region with 21,2 million inhabitants - a four-day lockdown has been declared to test all residents for the virus. This fuels the fear that the Chinese government will intervene very rigorously and thus not spare its own economy. This also affects the demand for oil. China is the largest oil importer in the world.
However, it is not certain that the price of oil will fall much further. There are signs that oil demand is falling less than some experts now suggest. In effect, the supply of oil on the world market remains tight and, for example, the oil supply in the US has shrunk. Opec can also pull a rabbit out of the hat next week. Saudi Arabia hinted last week at production-restricting measures to give speculators a smaller role in the market. If there is also a deal with Iran, it will be exciting which direction OPEC will take.
Diesel as an alternative
The diesel price has taken a step back, but still remains relatively expensive. Diesel is now even more expensive than petrol at the pump. This is partly because excise duties on petrol were reduced more than those on diesel earlier this year. Russia is a relatively important partner of the EU for the production and supply of diesel. Due to the war in Ukraine, these deliveries are very difficult. The extremely high gas prices also contribute to this. Companies that use a lot of gas try to keep diesel as a backup fuel wherever possible. The risk of gas rationing is seen as real. Diesel is relatively easy to store yourself and can be obtained in more ways.