Low demand from the United States caused oil prices to drop just over $1 this week. Despite the relatively low oil price, the US is marketing barrels from its strategic reserves. The fact that the oil price is not falling even more is mainly due to a report from the International Energy Agency (IEA). This predicts that global demand for oil will rise sharply in 2023.
Oil prices are down about $1 this week. On Friday, February 10, the price of Brent oil reached its highest point in the past seven days, at $86,46. On Wednesday, February 15, the oil price was at the lowest point of the week. At the time, the Brent benchmark was trading at $85,26.
Low demand from the United States remains the main reason for the falling oil price. According to the latest report from the US Energy Agency (EIA), the oil inventory of US companies has increased by 16,283 million barrels. This indicates that the demand for oil in the United States has declined considerably. Inventories are now the largest since October.
Yet the US government is releasing 26 million barrels from strategic reserves this week. The release is an old obligation. In 2015, the US Congress passed a law requiring the US government to periodically release oil from its reserves. The US Department of Energy has considered abandoning this round of sales as the United States already released 2022 million barrels of crude oil in 180. Because this requires the approval of the American Parliament, the ministry has decided to abandon this decision.
After the sale, only 372 million barrels remain in US government storage, the lowest level since 1983. To quickly replenish oil supplies, the ministry decided to buy back 25 million barrels of crude oil in the short term. In addition, the ministry will soon enter into discussions with Congress to prevent unwanted releases in the future.
Price increase after International Energy Agency forecast
The fact that the oil price did not fall even more sharply this week is due to a recent report from the International Energy Agency. The agency revised upward its forecast for the first quarter by 500.000 barrels per day. The reopening of the Chinese economy will increase oil consumption more strongly in the long term. Ultimately, global oil consumption will increase by 2 million barrels per day. The oil market is becoming tighter due to rising oil demand. The agency predicts that supply will be even lower than demand in the first half of 2023. The IEA predicts that a situation will then arise in which demand exceeds supply.
The growth in global oil consumption is offset by a smaller contraction in supply. The agency has adjusted downwards the forecast for the contraction of Russian oil production. Due to the European Union's sanction, the agency expects that the country will put less oil on the world market. In January, the IEA predicted that Russian oil production in the first quarter of 2023 would be 1,6 million barrels per day lower than before the war. The agency now estimates that the contraction will be limited to 1 million barrels per day.
The diesel price remains relatively stable this week. On February 9, 100 liters of diesel traded for €128,33. On February 12, the price fell to €126,51. The diesel price reached its highest price on February 15 at €129. On Thursday, February 16, the price had fallen again to €127,78.