The prices on the oil market this week could best be compared to a roller coaster. At the beginning of the week, the war in Israel caused an increase of 4,4%. However, sentiment quickly changed. Due to a sharp drop in demand from the United States, the oil price was 11% lower again on Wednesday, October 2,6. What's up with that?
On Thursday, October 5, the oil price was at its lowest point since August 28. On that day, the so-called Brent benchmark was trading at $84,07 per barrel. On Monday, October 9, the oil price reached its highest point of the week, at $88,15. By Wednesday, October 11, the price had fallen again to $85,82.
The strong fluctuations in the oil market follow the war in Israel. This has little to do with production in the Jewish state. Israel even produces less than 300.000 barrels of oil per day. The unrest focuses on involvement and collateral damage to the infrastructure of surrounding countries. The main fear in the market is that Iran will become involved in the conflict, as that country provides military support to Hamas and Hezbollah. This could hit supply hard, as Iran is responsible for 3% of global oil production.
Iran currently denies involvement in this weekend's attack. US President Joe Biden appears to confirm that there is no evidence of direct involvement. Yet the country's interference in the long term is not unthinkable, now that Israel appears to be heading for a long war. Israel has now called up 300.000 reservists and the current air strikes appear to be preliminary shelling before entering the Gaza Strip with ground troops. The question is whether Iran will accept this.
Moreover, there is fear that the conflict will spread further across the region. The energetic rapprochement attempt between Saudi Arabia and Israel appears to have been seriously damaged. Saudi Minister Faisal bin Farhan al-Saud did not condemn the attack. He emphasized that the war was the logical consequence of Israel's illegal occupation. Now that the normalization of relations between the two countries is at risk, relations throughout the Middle East appear to be under pressure. Against the background of this instability, analysts expect the oil price to rise substantially. Around Tuesday, October 10, there was talk of a lower limit of around $100 per barrel.
United States helps price down
It is doubtful whether things are progressing at such a pace. Because the increase is based on such hypothetical grounds, the oil price increase turned out to be fragile. Lower demand from the United States was enough reason to lower the price of a barrel of oil by about $2,50. It must be said that there is a huge difference between market expectations and practice. Data from the American Petrolium Institute (API) shows that oil inventories increased by 12,94 million barrels this week. The market expected a decline of 1,3 million barrels. A decline was not entirely unexpected, as the capacity of refineries is on the low side due to maintenance. However, that does not alleviate the concern, because gasoline inventories also increased by 3,6 million barrels while the market expected a decline of 800.000 barrels.
The diesel price reacts slightly this week to the events in Gaza. Over the weekend, the diesel price was at the lowest point of the week. On Saturday 7 and Sunday 8 October, diesel traded for €135,91 per 100 liters. Afterwards, the price rose consistently to €139,84 on Wednesday, October 11.