Relatively small fluctuations in the oil price mask the turbulent times in which the oil market finds itself. Analysts are weighing disappointing oil demand against the problems in production. This is further illustrated by two authoritative reports published this week. Demand for oil will decline, the International Energy Agency predicts. Opec, on the other hand, is sticking to growth in oil demand for the coming year.
The listing of Brent oil remained fairly stable compared to the development of the last few weeks. On Wednesday, September 14, Brent oil rose to $94,59 a barrel, its highest point this week. However, yesterday (Thurs. September 15) the price dropped to $90,87 a barrel.
The ailing economy is having an impact on oil prices. The aggressive interest rate policy of the central banks, in anticipation of a recession, is putting pressure on the oil price. The international energy agency (IEA) came out this week, predicting that oil demand will decline in the fourth quarter. Demand is falling, especially within the countries of the Organization for Economic Co-operation and Development (OECD). The ailing Chinese economy and the strict lockdowns in several cities also continue to depress the demand for and thus the price of oil. However, the IEA expects these effects in China to be short-lived and foresees an increasing demand for oil in China in the course of 2023. For the western countries, the IEA is not counting on growing demand. On an international scale, the IEA predicts that the high price of gas will maintain the value of oil. Gas-intensive industries are expected to switch to oil whenever possible.
OPEC
Unlike the IEA, OPEC has made no adjustment to forecast oil demand. They maintain the growing demand for oil in the final months of 2022 and predict further growth in oil demand in 2023 at 2,7 million barrels per day. Developments in China are being monitored especially closely by analysts as that country is one of the largest buyers of oil on the world market. The chance that China will let go of the zero-corona policy is considered very small by analysts. It is then considered probable that the number of cases of illness increases in the winter period. New heavy lockdowns with all the associated consequences therefore seem unavoidable. China is also considering exporting fuel. That is a sign of disappointing domestic demand and also a sign of a less robust economy.
Crisis contribution
Reuring was also created by the State of the Union of the European Union. In bombastic terms, President of the European Commission Ursula von der Leyen announced that companies in the fossil sector must pay a 'crisis contribution'. The question is how feasible those plans are. Of the major oil companies Exxon Mobil, Chevron, Shell, BP, ConocoPhillips and TotalEnergies, only the latter is a European company. According to experts, Europe has very limited legal means to enforce an extra tax, especially with foreign parties.
The diesel price took a big step back this week. On Tuesday September 13, the price for diesel was still €151,46 per 100 liters. That has dropped today (Friday 16 September) to € 141,23 per 100 litres. That is the lowest price since the beginning of August. As a result, the diesel price is significantly out of step with the oil price. For a change, diesel is now falling in price faster. In recent weeks there was the story that the demand for diesel remained high, while the supply decreased due to the disappearance of Russia. As a result, the price remained stable. It's hard to put a finger on what's going to change. That demand may have remained somewhat less than the oil companies had suggested.