The increase in the oil market remains quite limited for the time being. Despite further escalation of the security situation in the Middle East, oil prices rose less than $1 at the market peak. Due to the weak economic situation in China, there was even a dip, although this is not yet noticeable on the diesel market.
On Thursday, January 11, Brent crude was trading at $77,40 per barrel. In two days, the benchmark rose to the level of $78,29. On Wednesday, January 10, the market reached its lowest point of the week at $76,79.
The upward momentum early in the week was driven by further escalation in the Middle East. On Friday, January 12, the market was still quite impressed by the American bombing of Houthi ships. This was followed by a message from the rebels that from now on they also consider American ships as targets. On Monday, January 15, the rebels fulfilled this promise and opened fire on an American merchant ship.
On Tuesday, January 16, the fire was further stoked after Iran fired missiles at the Iraqi city of Erbil in the Kurdish autonomous region and several places in Syria. Iran claims the attack targeted bases of the Israeli security services Mossad. Military analysts see little in this statement and believe that the attack should mainly be read as a retaliation for the American patrols in the Red Sea.
Chinese economy is taking over
Remarkably, the Brent benchmark turned lower on Tuesday as Iran intensified its bombing campaign. On Wednesday, November 17, Iran bombed Iraq and Pakistan. The Iranian government claims that it is targeting various anti-Iranian militant groups.
The impact of this has been almost completely wiped out by the news that Chinese economic growth is sharply disappointing. The Chinese economy appears to have grown by only 2024% in the fourth quarter of 5,2 compared to a year earlier. This means that growth is lagging behind analysts' expectations. Compared to the third quarter, the economy even grew by 1%, half a percentage point less than in the third quarter. The market expects that the weak economy will have an impact on demand from Chinese industry.
Weaker forecasts
Research agency CITI has revised downwards its price forecast for 2024 and beyond. For 2024, the agency has lowered the price from $75 to $74 per barrel. The research firm sees weak demand in the oil market as the main cause and expects prices to fall further as the economy has weakened significantly compared to 2023. However, CITI expects prices not to fall below $70.
In addition, the actions of the Houthis in the Red Sea keep prices high. Although this is a temporary effect, CITI believes and this does not only apply to the geopolitical situation in the Red Sea. According to the research agency, OPEC is increasingly unable to keep supply pressure under control. The agency expects that the world market will actually have a surplus of 1,2 million barrels. For 2025, the company has revised their forecast down by as much as $10 to $60.
The price of diesel has not been affected by the weak oil market in recent days and rose slightly. Diesel was trading at €127,52 per 100 liters at the beginning of last week. On Friday, January 12, the price of diesel rose to $129,97. The price has remained above €129 in recent days.