The price of oil rose slightly this week, briefly reaching its highest point since late April. US commercial reserves fell significantly and meanwhile geopolitical tensions in the Middle East continued to dominate the market. On the other hand, the weaker Chinese economy is dampening the increase.
The oil price has taken another step upwards compared to last week. On Thursday, June 27, oil traded at $85,26 per barrel. On Friday, June 28, the price dropped slightly, to $85. Since then, the price of oil has risen. On Monday, July 1, the oil price was at its highest point since April 1. That day the price for a barrel was $86,60. The price has now dropped somewhat.
An important reason for the increase is a significant decrease in US oil reserves. Data from the American Petroleum Institute (API) shows that commercial reserves have fallen by more than 9 million barrels. The market expected reserves to fall by 150.000 barrels. This news creates a lot of upward momentum, because reserves have risen more sharply in recent weeks than the market expected. This is a sign that demand is lower than expected.
Oil market players are waiting for a growing demand for oil, due to a seasonal increase in air traffic. The market expects that demand may increase significantly due to this seasonal trend. The significant decline in reserves could indicate this.
Geopolitical tensions
In addition, geopolitical tensions keep the oil price at a stable level. Fears of a large-scale Israeli attack on Lebanon continue to dominate the oil market. Israel is sending mixed signals about a possible war with its neighboring country. For example, Israeli Defense Minister Yoav Gallant said during a state visit to Washington that Israel is not looking for a war in Lebanon. In the same message, the minister also said that Israel is capable of bombing Lebanon back to the Stone Age. Meanwhile, Iran indicates that Israel will face a devastating war if it invades Lebanon.
Yesterday (July 3) the news followed that Israel had managed to kill a senior commander of Hezbollah. The commander was killed in a drone attack on his car in the coastal city of Tyre. According to Israel, the commander was involved in recent attacks in the border area between Lebanon and Israel.
Chinese economy slows growth
The fact that the increase remains limited is the result of signals that the Chinese economy was somewhat weak in June. The Purchasing Managers Index (PMI) of the Chinese government's statistics bureau, an important indicator of economic growth, stood at 49,5 that month. A PMI above 50 indicates that the economy is growing. If the PMI falls below this, there is a contraction. This means that the PMI has reached its lowest point in five months. This result raises doubts about the recovery that the Chinese economy has undergone in recent months. In addition, consumption in the world's largest producing country has fallen. The US Energy Agency (EIA) published a report this week showing that Chinese oil consumption fell by 2023 barrels in the first half of 300.000 compared to the same period last year.
The diesel price rose this week along with the oil price. On Thursday, June 27, diesel traded for €131,44. On Monday, July 1, the price reached the lowest point of the week, at €131,14. Then the price of diesel rose again. The price was highest on Wednesday, July 3, at €132,54.