Oil prices took a step up this week. Lower production targets from both Saudi Arabia and Russia are amplifying concerns about global oil supply. However, there is also negative price pressure. Once again, the Chinese industry appears to have shrunk.
The price of Brent oil has risen almost all week. On Thursday, June 29, oil traded at its lowest price of the week, $74,51 per barrel. The oil price rose particularly sharply on Monday, July 3, by $1,60. The oil price reached its highest point of the week on Wednesday, July 5. On that day, oil traded at $76,65.
The higher oil price is the result of concerns about supply. On Monday, July 3, Saudi Arabia announced that it would maintain lower production targets for at least another month. Last month, the Gulf state announced it would reduce its targets by 1 million barrels per day. This came as quite a surprise, as Saudi Arabia normally only adjusts its targets in consultation with the OPEC oil cartel. Initially, the lower production targets would only apply to the months of June and July, but with the extension, Saudi Arabia's output will also remain low in August.
Shortly after the message, Russia also unexpectedly contributed. Russian Prime Minister Alexander Novak announced that Russia will also reduce its oil production by 500.000 barrels per day in August. This comes as quite a surprise. In June, Russia decided not to support the Saudi attempt to raise oil prices. Until now it was assumed that Russia needs as many petrodollars as possible to finance the war in Ukraine. Now the country appears to have decided that a reduction in the targets would be beneficial.
The US is also doing its part
Developments in the United States are also causing upward price pressure. According to the US Energy Agency, US oil supplies fell by 4,38 million barrels. This means that oil supplies have fallen for the second week in a row. This is unprecedented, as oil supplies have increased almost every week in 2023. Last week, inventories fell by 2,40 million barrels.
Yet there is not only upward price pressure. Recent data from various governments shows that the industries of almost all major economies are currently shrinking. China in particular catches the eye. Data from the Chinese government shows that the PMI (Purchasing Managers Index) will be released on June 49. When the PMI is above 50, an economy is growing. If the PMI is lower, there is a contraction. With the PMI of 49, there is therefore a contraction. Yet there is a bright spot. In May the PMI was 48,8. So it appears that the contraction of Chinese industry is starting to slow down.
Due to the increase in excise duties on July 1, the diesel price has increased significantly. On Thursday, June 29, diesel was trading for €110,97 per 100 liters. When the excise duties came into effect, the diesel price reached €121,60. After that, the price rose slightly. On Wednesday, July 5, diesel traded for €121,98.