The oil price has taken another step upwards after a short period of calm. Renewed tensions in the Middle East and a less favorable exchange rate of the euro against the dollar provide new upward momentum.
On Thursday, December 21, oil traded at $79,39. After a brief decline, the oil price rose quickly again. The price was highest on Boxing Day, at $81,07. The price is now slightly lower again.
Calm seemed largely restored on Sunday after the major Danish shipping company Maersk announced it would sail through the Red Sea again. The announcement of the maritime operation, led by the US Navy, has prompted the Danish shipping company to sail through the Red Sea again. Together with Great Britain, Bahrain, France, Italy, Norway, the Netherlands and Spain, the country is launching a security mission in the Red Sea. In principle, the coalition only plans to act defensively and shoot the Houthi missiles and drones out of the sky.
Maersk's announcement confirms that the intervention gives shipping companies the confidence to sail through the essential hub again. The shipping company previously decided to sail via the Cape of Good Hope. According to the shipping company, sailing via the Red Sea and the Suez Canal saves approximately $1 million in fuel costs per voyage. In addition to various shipping companies, oil company BP also decided to no longer sail via the Suez Canal. Despite the security action, the oil giant still detours via the Cape of Good Hope.
Renewed chaos
However, after the Christmas weekend, the oil price suddenly rose again by 2,5%. Geopolitical tensions flared further over Christmas. On Tuesday, December 26, a container ship was again attacked by Houthi rebels. According to the shipping company, no injuries were reported in the incident. Earlier this month, two attacks were reported by the British Maritime Trade Authority.
In addition, Israeli Prime Minister Benjamin Netanyahu announced his terms for peace in Gaza in an op-ed in the Wall Street Journal. Earlier in a speech on Monday, December 25, it became clear that stability in the Middle East could take a long time. While even the United States is now calling for a ceasefire, the Israeli prime minister indicated that he would further intensify the offensive in Gaza. The miximalist conditions for peace suggest that the conflict will continue for some time. For example, Hamas must be destroyed, Gaza must be demilitarized and Palestinian society must be 'de-radicalized' before Israel is prepared to make peace. With the latter, the prime minister hints at a long-term occupation of the Gaza Strip.
Fall in US interest rates
In addition, sentiment that the United States is going to lower interest rates is increasing. Traders estimate there is an 86% chance that interest rates will be cut by 25 basis points (0,25%). Due to the rumors, the value of the dollar has fallen against the euro. A dollar is now worth €0,90. At the beginning of December the exchange rate was still 93 euro cents. This causes a higher oil price, since the commodity is paid for in dollars. When the dollar is low it is cheaper for investors outside the United States to get into oil, increasing demand for the commodity.
Despite the higher oil price, diesel prices were under some pressure. On Thursday, December 21, 100 liters of diesel traded for €128,44. On Wednesday, December 27, the price fell to €127,19.