Oil prices are back at last week's peak. Due to low demand from China, Saudi Arabia has been unable to raise oil prices permanently. A small revival following a Chinese attempt to restore economic growth was soon nipped in the bud by news from America. The US central bank (Fed) has announced that at least two more rate hikes will follow.
On June 8, the price of Brent oil was €75,96. On Monday, June 12, the oil price fell to the lowest point of the week. At that time the price for a barrel was €71,84. At the time of writing (Thursday, June 15), the oil price fluctuates around €73,30.
The lower oil price shows that the Saudi production cut is not yet effective. Last week, Saudi Arabia decided to cut its oil production by a million barrels per day. The Gulf state tried to give the oil price a boost again. But less than ten days after the announcement, the oil price found a new low.
Lower demand is mainly the reason for the decline. The market held on to a significant increase in the oil price for a long time, but expectations now appear to be becoming less high. On Sunday, June 11, Goldman Sachs lowered its oil price expectations in the second half of 2023. Until Sunday, the investment bank expected a barrel of Brent oil to trade for $95 during this period. The bank has now adjusted the forecast to $86 per barrel. The main reason for the lower price is disappointing Chinese demand. In particular, the growth of the oil-intensive Chinese industry appears to be much lower than expected.
Momentum by central banks
The fact that the oil price has been on the rise again since Monday is the result of the decisions of the American and Chinese central banks. To give the Chinese economy some momentum again, the Chinese central bank has lowered its interest rate on short-term loans that must be repaid within seven days by 0,1 percentage point. China is thus committed to increasing local consumption. Now that demand from the West is disappointing, Chinese industry is dependent on domestic consumption for its growth. A similar reduction is expected for medium-term loans.
Meanwhile, the Fed is actually creating negative price pressure. The US central bank appears to continue to focus on interest rate increases. Although the central bank has chosen to leave interest rates alone this month, the bank has made it clear that at least two more interest rate increases of 0,25 percentage points will follow this year. The new increases follow the news that inflation is falling slower than expected.
Diesel price
The diesel price remained fairly stable this week. On Thursday, June 8, diesel traded for €112,88 per 100 liters. Until June 13, the diesel price fell slightly, to €110,79. On Thursday, June 14, the diesel price took another big step up, to €112,60.
Coming soon the diesel price will be permanently higher. Full excise duties on fuel will return as of July 1. Fuel taxes were temporarily abolished due to higher energy prices as a result of the Ukrainian war. Now that oil prices have been falling for almost nine months, the government thinks enough is enough. The excise duty on diesel is approximately 52 cents per liter.