The oil market took another step up this week. Both crude oil and diesel rose to their highest levels in months. Tighter stocks are an important cause of this. Production restrictions from two large producing countries do not help to dampen the market somewhat.
This week, Brent crude oil prices continued the upward trend that started almost a month and a half ago. Last week the market seemed to pause, but on Wednesday (August 9) Brent closed at $87,55 per barrel. That is the highest closing price in more than six months.
The news of last week's production cuts by Saudi Arabia and Russia still resonates. This week, new forecasts from the International Energy Agency (IEA) and Opec were added, providing fodder for the bulls in the market. The IEA signals shrinking inventories of crude oil and oil distillates for the rest of the year. That is a potentially price-increasing factor. Worldwide demand for oil is growing less strongly. This has now been adjusted to 1 million barrels per day less and was 150.000 barrels per day in the previous forecast. Opec also assumes that demand will grow less quickly. The cartel now expects additional demand of 2,25 million barrels per day for 2024. That is slightly less than the forecast growth for 2023, which is 2,44 million barrels per day according to OPEC.
Profit margin is boosted
The higher oil price does not hurt the profit margin of the major oil refineries on fuel production. Based on Refinitiv Eikon data, Reuters writes that the profit margin on refining a barrel of crude oil at an average European or American refinery has increased by 33% this year. For comparison: in Asia the increase is 'only' 9%. Industry sources also report that margins were thin in the second quarter. The better margins are mainly due to better demand for transport fuels such as diesel, kerosene and, to a slightly lesser extent, petrol. There are specific concerns about the availability of diesel, especially in Brazil. This is not only due to increasing demand but also to government policy. The country works with a complicated import system that includes, to a certain extent, a maximum price for foreign diesel.
Having the diesel tank filled also hurts the wallet in the Netherlands. On Thursday the price rose to €138,80 per 100 liters. That is the highest level since January. It should be noted that the temporary excise duty reduction was canceled on July 1. Filling a diesel tank is not only an expensive hobby in the Netherlands.
Our colleagues at Agrarheute report that diesel and domestic heating oil have not been so expensive in Germany for a long time. Prices are of course a bit difficult to compare, but United Consumers indicates an average consumer price of €1,95 per liter for diesel in the Netherlands and in Germany the recommended retail price is around €1,74 per liter according to the German automotive association Adac. It is not surprising that gas station owners complain about the large differences in excise duties. You hear fewer complaints from the agricultural sector, but it remains remarkable that in one EU member state farmers are allowed to use red diesel or oil while others have to pay the full price.