Despite the further escalation of the conflict in the Middle East, the price of oil has barely risen. An attack by Ukraine on Russia's oil infrastructure also provided only limited upward momentum. A larger supply from Libya managed to keep the price down reasonably, but the weaker economy in particular limited the increase.
The oil price rose slightly this week, but mainly appeared to be fairly stable. On Friday, January 19, the price reached its lowest point of the week, $78,56. The price rose until Monday, January 22. That day, the Brent benchmark reached the level of $80,06. Since then, the price has been under pressure again.
The oil price continues to react slightly to the geopolitical unrest in the Middle East. The conflict seems to be escalating further and large countries in particular are increasingly pitted against each other. On Sunday, October 21, an Iranian armed group carried out a rocket attack on a US base in Iraq. Although anti-missile fire destroyed most of the rockets, at least two people were killed in the attack, Iraqi authorities said. In response, the United States decided to launch an attack on three Iranian military facilities in Turkey, among others. The United States said the facilities were responsible for the attacks in Iraq.
Ukrainian drone attack
In addition, the war in Ukraine is also causing supply problems. Ukraine is currently targeting the Russian oil sector. On Friday, January 19, Ukraine managed to hit an oil depot in the Russian region of Bryansk with a drone attack. An even more prominent attack on Russia's oil sector soon followed. On Sunday, January 21, Russia decided to halt operations at several refineries in the Navatek port after a fire broke out. According to the Ukrainian news agency Interfax, the fire was the result of a Ukrainian drone attack on the port. The refineries process both light oil (the raw material for gasoline) and heavy oil (the raw material for diesel).
The latter attack in particular causes a higher oil price. Although Novatek produces oil for the Ukrainian front, most of its production is destined for the international market. Since most oil is imported from the port to China, Singapore, Taiwan, Malaysia and Turkey, the direct impact on the European market is relatively limited. However, the lower Russian supply does create additional competition in the Saudi market, which is crucial for Europe.
On the other hand, oil production has resumed at the Libyan Sharara oil field. Protests at the oil field temporarily halted production. The Libyan government has now met the demonstrators' demands, which has pacified the situation.
Weak economy
Traders in various media say it is surprising that the price is not even higher given all the unrest. Various economic media indicate that traders are using the unrest to aim for higher prices. Tamas Varga of broker PVM explained to Reuters why the response remains limited: due to the weak economy, different governments appear to be able to tame expectations.
The price of diesel clearly rose this week along with the oil price. On Thursday, January 18, diesel was trading for €129,38 per 100 liters. On Wednesday, January 24, the diesel price was higher, at €131,30.