After last week's sharp fall in prices, the oil price rebounded this week. Another step in China's reopening pushed oil prices higher. In addition, concerns about the EU boycott of Russian oil products, which will take effect on February 5, are driving up the oil price.
The oil price has been on the rise all week. On Friday, January 6, the oil price was at its lowest point of the week. The price of Brent oil was $78,57 per barrel on that day. After that, the price rose constantly. On Thursday, January 12, the price of a barrel of Brent oil was $83,93.
Optimism about China's reopening was the main reason for rising oil prices this week. Until December 2022, China had the strictest Covid policy in the world. For example, Chinese people were not allowed to leave their homes at all during lockdowns and infected people had to serve their quarantines in special Covid hotels. Because many Chinese could not go to work, the Chinese economy was performing extremely poorly. In 2022, China's GDP grew by just 2,8%, a Reuters analysis shows. This is a lot less growth than in previous years. When Covid seemed to have been eradicated in China in 2021, GDP still grew by 8,4%. Because China is the world's largest oil consumer, global oil demand has lagged.
Since December, China has been phasing out this strict Covid policy. The new relaxation fuels optimism that China will continue to quickly take new steps to further open the country. According to several analysts, it is very likely that China will reduce all its corona measures in 2023, resulting in economic recovery. China's GDP is expected to grow by 4,9% this year, Reuters writes. This has major consequences for the oil price. For example, hedge fund manager Pierre Andurand estimated in an interview with Bloomburg that the opening of Asia could lead to an oil price of $140.
Concerns about EU oil boycott hang over the market
In addition to China's vigorous opening, the approaching second phase of the EU embargo on Russian oil is also driving up oil prices. Since December 2022, the member states of the European Union have no longer purchased Russian oil delivered by ship. So far, the boycott has barely affected European oil prices. However, from February 5, 2023, a ban on the import of refined oil products will be added. Western countries import a lot of diesel from Russia. Dealing with these imports could prove to be a significant challenge for European countries. In November 2022, the European Union and the United Kingdom imported another 1,34 million barrels of diesel from Russia. There is a fear that the loss of these imports could lead to a diesel shortage.
The price of diesel rose this week along with the oil price. On Friday, December 6, the diesel price stood at €131,33 per 100 liters. On Thursday, January 12, the diesel price had risen to €133,15. This means that the increase in diesel prices remains limited despite the fear of shortages.