The price of oil is currently on the rise. Lower production at the world's largest oil producers is putting considerable upward pressure on prices. In addition, rising confidence in the Chinese economy is leading to considerable upward momentum.
Prices on the oil market are currently rising rapidly. On Thursday, July 20, the price of Brent oil stood at $79,64. After that, the oil price rose almost constantly. On Tuesday, July 25, the oil price was at its highest point of the week, at $83,64.
The main reason for the rising prices on the oil market is lower international supply. After OPEC+ had already decided twice to adjust production targets downwards, the cartel's two main producers have reduced production on their own. In June, Saudi Arabia announced it would cut its daily oil production by 1 million barrels per day. It appears that the Gulf state has now met the new target. From August 1, Russian oil production must also decrease by half a million barrels. Notably, the increase in the oil market appears to be paralleling the steady reduction in oil production.
Oil market relies on recovery of Chinese economy.
In addition, investors appear to be gaining more confidence in the Chinese economy. Until the summer of 2023, declines in the oil market were held back by confidence in the recovery of the Chinese economy. However, so far growth appears to have been very disappointing. In the second quarter of 2023, China failed to achieve the 7% growth target. The Asian country's economy grew by only 6,3%. The result still seems relatively strong, but in the second quarter Chinese GDP growth fell to 0,8%. In the first quarter, GDP grew by 2,2% and the decline does not appear to have ended yet. If nothing changes, growth will fall to 0,5% in the third quarter, analysts believe.
With some analysts predicting the end of the Chinese economy's explosive growth, the Asian country has had enough. On Tuesday, July 25, Chinese news agency Xinhua reported that the politburo is about to adjust policy to give the economy a major boost. It appears that China is focusing on stronger domestic demand for Chinese products now that consumption in Western countries is lagging behind. In addition, the Communist Party and the state have jointly announced more capital from private investors to finance major projects in areas such as infrastructure, water conservation and green energy. In other words, China appears to be planning to stimulate the economy with additional public spending.
In addition to the price of crude oil, the price of diesel is also rising sharply at the moment. On Thursday, July 20, large lots of diesel were traded for €124,16 per 100 liters. On Wednesday, July 26, the diesel price was a lot higher. That day, diesel traded at €128,32. The increase appears to be related to lower Russian oil supply. Russia is the world's largest producer of so-called heavy oil, the raw material for diesel.