The central banks almost have more influence on the oil market than Opec, you would think after the market reacted strongly to the Fed's interest rate decision. However, we should certainly not ignore the influence of production restrictions. In the meantime, Exxon remains confident in the fuel market. The demand for petrol and diesel will continue to grow in the coming years according to the oil giant.
On Monday, September 18, the price of Brent crude oil peaked at $94,43 per barrel. That was the highest price in ten months. However, in recent days the oil price has taken cautious steps back. At the time of writing, Brent is at $93 per barrel.
The policy of the US central bank, the Fed, is cited by many analysts as the reason for the small decline in oil prices. The Fed is keeping interest rates unchanged, but this is seen as a 'hawkish pause', a temporary interruption of its aggressive interest rate policy. Interest rate increases later in the year that the Fed is targeting could put a brake on economic growth and thus oil demand.
News that oil supplies in the US have shrunk somewhat had little effect on the market. America has partly drawn from its reserves to sell extra crude oil on the world market. According to some analysts, that is a signal that world demand for oil is strong. The drop in stocks of distillates such as gasoline and diesel is seen as a sign that the US economy is doing better than expected. This also plays a role in the fact that American refineries are scaling down production in the fall for planned maintenance.
Oil can rise much further
Investment bank JP Morgan warns that Brent oil could rise to $120 per barrel. The market is already tight and the bank expects that production restrictions could further drive up prices. Saudi Arabia and Russia are the driving force behind the price rally in recent months according to JP Morgan. There is a significant risk associated with the higher oil price. Energy in general and oil in particular are an important cause of high inflation. This puts a brake on economic growth and forces central banks to adopt aggressive interest rate policies.
The European Union may be even more sensitive to this than other parts of the world. The EU is fully committed to greening, but securing sufficient affordable energy remains a challenge: every member state for itself. This is especially visible with gas, but with oil it is not much different according to some analysts. Major powers such as the US and China pursue a more structured policy in this regard.
Petrol and diesel remain important
You would almost think that the role of diesel has come to an end. They think differently about this at Exxon Mobile. The company expects fuel and chemical product sales to grow further to $16 billion by 2027, approximately $4 billion above current levels. Towards the end of this decade, one of the world's largest oil companies expects demand for gasoline to peak. That is years later than other organizations' predictions. Exxon's fuels and chemicals divisions have been merged to enable rapid switching, depending on which segment the margins are best.
The diesel price is not quite following the crude oil this week. Diesel rose last week to almost €150 per 100 liters. However, in recent days the price has dropped slightly to €145. These are prices we have not seen since November last year.