The prospect of the Fed’s first rate cut in four years has pushed up oil prices. Oil isn’t really skyrocketing. The price is too much under control for that to happen because of the weak Chinese economy, which shows no signs of recovery in the latest figures either.
Last week, the benchmark Brent oil price fell below the $70 mark ($69,19 on September 10), a low since December 2021. As of Wednesday afternoon, September 18, Brent oil is well above that mark again, at $73,34 per barrel.
At the time of writing (Wednesday afternoon, September 18), the market is eagerly awaiting the Fed's interest rate decision. The American central bank is expected to lower the interest rate for the first time in four years. A rate cut makes borrowing cheaper for individuals and companies and also has a positive effect on the wallets of American consumers who have mortgages or (credit card) debts. That is why this prospect is already giving the oil price a boost. The question is whether there will be a rate cut of 25 or 50 basis points. A larger rate move would give a greater boost to the oil price.
Production restrictions are also still in place due to Hurricane Francine, which has swept through the Gulf of Mexico. The most recent figures (as of September 17) from the US Department of the Interior show that 5,62% of oil production in the Gulf of Mexico is still at a standstill. That is 101.778 barrels per day that are not being produced. Last week, 23,55% was still at a standstill. The facilities are being inspected and undamaged facilities are being put back into operation as soon as possible. Production platforms that have been damaged can remain out of production for longer, according to the government service BSEE.
Meanwhile, China’s weak economy is keeping oil prices in check. New August figures confirm that China’s economy is struggling. China’s industrial production growth has slowed, oil production fell for the fifth straight month, unemployment is rising and house prices are falling sharply.
Diesel
The price of diesel is €118,70 per 100 litres. A week ago it was €117,27 per 100 litres.
Meanwhile, alternatives to fossil diesel are also being sought. The British-Australian mining group Rio Tinto is working in Australia to start a pilot to produce renewable diesel from seeds of the legume tree pongamia (Indian beech), which is native to the country. The company wants to green its own diesel use with this. Rio Tinto is committed to electrification in the long term and the use of pongamia oil can complement this in the medium term.