The oil price has been quite volatile this week. A price drop in Saudi oil put a lot of pressure on the market. However, due to the unrest in the Middle East, the price quickly corrected again. However, the price of diesel did not pay much attention to the fluctuations.
The oil price fluctuated considerably last week. On Friday, November 5, the Brent benchmark was trading at a high of the week at $78,76 per barrel. After the weekend, oil was trading sharply lower. Oil was trading at $76,12 per barrel in Europe at the time. The gap has now largely closed again and the oil price is again close to the peak of the week, at $78,52.
The lower quotation at the beginning of the week followed the news that Saudi Arabia is sharply lowering its oil prices. Due to weak international demand, Saudi Arabia has cut the price of Asian oil by $2 per barrel. The reduction fuels existing fears about low demand. According to analysts, the country is being forced to adjust its prices downwards because the United States, Russia and Iran are simply able to supply cheaper. However, it is still too early to conclude that the Gulf state is giving up its fight for a higher price. Saudi Arabia continues to emphasize that it is doing everything it can to push prices upwards again.
Red Sea crisis limited
The fact that the price quickly corrected again is due to an undertone of unrest. Despite greater international pressure, Israel is not yet slowing down in the war with Hamas. In addition, the closure of the Libyan Sharara field continues to have an impact on the market. Finally, the crisis in the Red Sea also keeps pressure on the oil price, although the impact appears to be less significant than expected. A Reuters analysis shows that the consequences for the oil sector are less strong than expected. Oil tankers still sail through the Suez Canal, as they are hardly attacked. So far, a small number of companies in the oil sector (including BP and Equinor) have decided to sail via the Cape of Good Hope.
This should not be entirely surprising, because the higher insurance costs do not outweigh the higher costs of detouring. Their data shows that the number of ships briefly dropped to 66 tankers during the initial attacks. In December, an average of 76 oil tankers per day sailed through the Red Sea. That was a decrease of only two tankers compared to November, according to data from MariTrace. This does not mean that the impact is zero, as hefty risk premiums are charged. According to Reuters, transportation costs have roughly doubled. Some analysts indicate that this may make it attractive for Europe to import oil from the United States, director of energy contracts on the futures market Bob Yawge of the Japanese investment bank Mizuho told Reuters.
The diesel price barely moved in the last week. On Thursday, January 4, €100 was charged for lots of 129,33 liters of diesel. On Tuesday, January 9, the price dropped to €127,18. On Wednesday, January 10, the price was in between, at €128,47.