Oil prices fell slightly this week. Due to the weak US economy, demand for oil in the United States is lagging. Still, the question is not far away. Because of European sanctions, the supply of Russian oil is falling. In addition, several prominent analysts agree that Chinese oil demand will rise sharply this year.
The oil price has fallen this week. On Friday, February 17, Brent crude was trading at $83. On Monday, February 20, the oil price was at its highest point of the week, at $84,07. After that, the oil price took a big step back. On Wednesday, February 22, oil prices reached their lowest level of the week at $80,60. On Thursday, February 22, the oil price recovered a little and reached a level of $82,31
The decline is a response to the weak US economy. The most recent meeting of the US central bank (Fed) shows that inflation is still high on the US policy agenda. Although dignitaries almost unanimously want interest rates to rise less quickly, it is almost certain that there will be several more interest rate increases this year. It is therefore likely that the American economy will take a step back this year, as a result of which the demand for oil in the United States will remain low.
The fact that the weak American economy is affecting oil consumption is once again evident from the build-up of American oil reserves. US oil inventories rose by 9,9 million barrels last week. This is again considerably more than the increase of 1,2 million barrels that the American Oil Agency (IAE) had in mind. The rapid build-up of inventories in the United States is gradually becoming structural. US crude oil inventories have been growing every week since mid-December. Most weeks, growth has been a lot faster than the IAE predicts. This indicates that the weak US economy is driving lower oil consumption.
Russia and China are driving up prices
On Thursday, the oil price took another step higher. The upward price pressure is caused by events in Russia and China. Russia announced on Wednesday, February 22, that it would cut oil exports by about 25%. The volume is approximately 500.000 barrels per day, which is 0,5% of the world's available oil. The lower output appears to be a response to Western sanctions on Russian oil exported by sea. So far, Russia has been able to compensate for the loss of Western imports through additional sales in China and India, but now the prediction by various analysts that the sanction would affect the global availability of oil appears to be coming true.
Meanwhile, several prominent organizations appear to agree that China's oil demand is set to reach a record high this year. Wood Mackenzie, FGN, Energy Aspect and S&P Global Comodity Insight all estimate that Chinese oil imports will increase by between 500.000 and 1 million barrels this year. In particular, greater demand for transport and passenger transport creates greater Chinese demand. Petrol, diesel and kerosene together are estimated to be responsible for around 80% of the additional demand for oil.
The diesel price fell this week along with the oil price. On Friday, February 17, the diesel price was at the highest level of the week, at €125,82. On Tuesday, February 21, the diesel price was at the lowest point of the week at €124,24. Then the price rose again. On Thursday, February 23, the diesel price was €124,50.