Oil prices are up nearly 5% this week. Lower US inflation data raises hopes that the era of aggressive rate hikes is coming to an end. In addition, Russia and Saudi Arabia are starting to get a grip on the supply on the market.
The oil price has risen by as much as 4,7% this week. On Wednesday, March 6, the price of Brent oil was at its lowest point of the week, at $76,52 per barrel. After that, the oil price rose sharply. On Tuesday, July 12, the oil price rose above $80 per barrel for the first time since the end of March. On that day, the oil price reached $80,11.
The oil market mainly reacted to the new US inflation figures. Inflation has fallen to 3%. Last year it was still 9,1%. This means that inflation has been lower for the twelfth month in a row. In May inflation was still 4% and in June inflation was 3,1%. Compared to May, prices have increased 0,2%. Prices rose by 0,4% between May and April.
The lower inflation leads to optimism, because the development seems to finally bring an end to the increases in the base interest rate in sight. However, it remains to be seen whether sentiment on the oil market is not too positive. For the time being, interest rate increases have not yet been completely avoided, ING analyst James Knightley writes in the bank's inflation report. According to the analyst, there is a risk that prices of services in particular will rise in the short term due to higher wages and the American Central Bank (FED) does not intend to leave future inflation to chance.
Lower offer
Finally, the supply side of the market also appears to be causing upward price pressure. Saudi Arabia has cut its oil production by as much as 1 million barrels per day since the beginning of this month and last week Russia announced that the country plans to reduce its oil production by half a million barrels per day. Although the new target only takes effect from August, analysts write that Russia is already reducing its production and it appears that the lower supply is gaining traction on the market. In addition, the market is anticipating reports from the International Energy Agency (IEA) and OPEC later today (Thursday, July 13). Price forecasts for the second half of the year are expected to rise due to lower supply.
The diesel price does not follow the sentiment on the oil market and remained quite stable this week. On Thursday, July 6, diesel traded for €123,46 per 100 liters. After some changes up and down, the diesel price on Wednesday, July 12, amounted to €123,78.