The oil price has risen slightly this week, but is having difficulty choosing a direction. Better economic expectations and geopolitical tensions led to an increase until Monday, March 25. However, oil prices fell later in the week due to lower demand in the United States.
The oil price has risen slightly again after last week's decline. The price fell until Friday, March 22. At the time, Brent crude was trading at $84,83 per barrel. The highest price of the week reached the oil market on Monday, March 25. On that day, oil prices rose to $86,08 per barrel. The price then dropped again to €85,41 on Wednesday, March 27.
According to analysts, the increase in oil prices until March 25 can partly be attributed to a better-than-expected economic climate. Although the economy is on the weak side, fears of a recession seem to be subsiding somewhat. In addition, inflation is a lot less strong than before, together with the strong hints from central banks, this gives confidence that interest rates will be lowered this summer.
Geopolitical tensions drive prices up
In addition, strong geopolitical tensions led to higher oil prices. Ukraine's attacks on Russia's oil infrastructure continue to raise supply concerns. In addition, Russian President Vladimir Putin's response to the attack in Krasnogorsk raises fears that the war will escalate further. While the whole world points the finger at IS, Putin tries to place as much blame as possible on Ukraine. According to analysts, there is a strong chance that Russia will seize the opportunity to initiate a new round of mobilization.
Finally, Israel is still not responding to the call for a ceasefire. Even the UN Security Council resolution to halt the offensive does not change this. On Monday, March 25, the council reached an agreement through a U.S. turn. Until then, America had always voted against resolutions seeking to enforce a ceasefire. However, the United States decided to abstain on Monday, so the country did not issue a veto. This seems to escalate rather than de-escalate the situation, as Israeli Prime Minister Bibi Netanyahu has made it clear that he has no interest in the resolution. The Prime Minister decided to cancel a delegation to Washington.
American demand is disappointing
The fact that oil prices started to fall at the beginning of this week is largely due to lower demand on the American market. The measurement by the American Energy Agency (EIA) shows that American crude oil inventories increased by 3,1 million last week. This is a significant increase compared to market expectations. A Reuters survey shows that oil market players on average expected a drop of 3,17 barrels. However, the increase remains somewhat limited. The American Petroleum Institute (API) previously noted an increase in reserves by as much as 9,34 million barrels.
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In addition, the increase in the diesel market is stronger. On Thursday, March 21, diesel traded for €133,28 per 100 liters. On Friday, March 22, the price was at the lowest point of the week, at €132,96. On Tuesday, March 26, the diesel price reached its peak of €134,69.