The oil price shows a surprising drop, mentioned by several analysts. What is going on here? The stabilization of electricity prices will also continue this week. For farmers, this is just less favorable than it sounds, especially now that the yields from solar panels and wind turbines are disappointing.
The oil market took a serious hit this week. At the beginning of the week, the Brent crude oil price rose to $82,42 per barrel on Tuesday, November 16. A sharp decline followed in the second half of the week. Today (Friday, November 19), Brent oil is at $78,54 per barrel, the lowest price in more than a month and a half.
Emotion factor is important
Fundamentally, not much has changed in the oil market. Several analysts offer two explanations for the sudden price drop. The lockdown announced by Austria is seen as a harbinger of what may happen in the rest of Europe. Developments in Germany in particular - as the largest economy in the EU - are being closely monitored. The measures hanging over the market cause uncertainty on the oil market and therefore lower prices.
The other reason is an annual phenomenon, namely the start of the holiday season. Next week America will celebrate Thanksgiving and then Christmas and New Year's Eve will not feel far away for American traders. It is a period in which employees take extra days off and various companies scale back production. It is not certain that this will happen, but in the past it has often appeared that oil prices come under some pressure during that period.
Separation in visions
Regarding longer-term expectations, the different views between the analyzes of oil and energy-related institutions and financial service providers are striking. In their recent analyses, OPEC, IEA and EIA predict a slower growth in demand for oil in relation to production. According to them, a stabilization or decline in the oil price would therefore be obvious. Banks such as Goldman Sachs, UBS and Commerzbank remain convinced that tightness will continue to dominate the market. They mainly assess the demand side of the market more positively and hint with terms such as bullish, solid foundation en strong demand on a possible price increase.
The diesel price reacted almost oppositely this week to the considerable price movements on the oil market. On Monday, diesel was €121,24 per 100 litres. That rose to €122,62 per 100 liters on Wednesday. Today the price has dropped somewhat, but €121,78 per 100 liters is still above the price at the beginning of this week.
Stable expensive power
The energy market appeared to stabilize in recent weeks. That trend has more or less continued this week. Prices are at a higher level than expected by various analysts. On Saturday, November 13, the EPEX Spot quotation stood at €153,88 per MWh, rising to €227,82 per MWh on Monday, November 15, the highest price in a month. It has now dropped slightly to €199,85 per MWh today, Friday November 19.
With the colder and windless weather approaching, analysts expect electricity prices to remain stable or rise slightly. In the absence of power from sun and wind, electricity from fossil fuels sets the price. Coal, gas and emission allowances are relatively expensive and these prices weigh heavily in the electricity mix. Especially if the demand for gas increases slightly due to additional demand for heating, this can have an impact on the electricity price.
Money for innovations
The European Commission announced on Tuesday, November 16, that it will release €1,1 billion for seven large-scale projects within the framework of the Innovation Fund. “Coupled with strong emissions reductions, innovation is a way to achieve the goals of the Paris Agreement,” writes European Commissioner Frans Timmermans. “With today's decision, we are providing concrete support to clean technology projects across Europe, allowing these projects to scale up breakthrough technologies that contribute to and accelerate the transition to climate neutrality.”
The subsidies support projects that develop and market new technologies in energy-intensive sectors. In addition to projects in the field of hydrogen and solar cells, there is also a Swedish large-scale installation for bioenergy and carbon capture and storage.