Oil market is having difficulty choosing a direction

The oil market has taken a small step down compared to last week. If you look at the bigger picture, the oil market is mainly stable. On Thursday, June 20, oil traded at $85,71 per barrel. The highest price of the week was reached by the Brent benchmark on Monday 24 June. On that day, oil traded at $86,01 per barrel. The next day, oil was at its lowest point of the week and traded for $85,01. At the time of writing (Thursday, June 27), oil has risen again in price to $85,05.

The oil market is not taking a clear position this week. Despite rising geopolitical tensions in the Middle East, there is little upside potential. Since Israel's Foreign Minister Yisrael Katz indicated last week that a "total war" against Lebanon was being discussed behind the scenes, there have been concerns about further escalation in the region. As a result, Israeli Prime Minister Benjamin Netanyahu's statements that the intensive phase of the war against Hamas is coming to an end did not really land. Still, reports that the United States is talking to Israel are taming the upward momentum somewhat.

American market remains dominant
In addition, demand concerns continue to dominate the US oil market. Contrary to market expectations, oil reserves have increased. In total, reserves increased by 3,6 million barrels last week, according to data from the American Energy Agency (AEI). A leading Reuters poll shows that economists had expected reserves to fall by 3 million barrels.

The summer holidays are also approaching in the United States. Overall, oil demand increases during this time as many Americans travel by car or plane to visit relatives far away. It must be said that we are still at the beginning of that period. Still, retirees and people without school-age children are already planning their trips during this period to avoid the worst holiday crowds. That makes it all the more remarkable that distillate reserves also increased by 2,7 million barrels. This indicates that the high level of oil reserves is not the result of an increase in production, but is created by low demand. Given the time of year, the market expected distillate reserves to increase by much less, namely 1,1 million barrels.

Tightness in the third quarter
Yet the weak demand on the American market is not really causing pressure. Analysts in the oil market still expect the market to be on the tight side due to additional air traffic. Recent reports about the aviation sector help, all of which confirm that air traffic has returned to pre-corona pandemic levels. That is why part of the market expects that the currently ample oil market could turn into tightness at any time.

The diesel price graph shows a similar plateau. On Thursday, June 20, diesel traded for €131,71 per 100 liters. The price has now dropped to €131,37.