The coronavirus is causing unrest in the oil market. Fears of the new variant discovered in South Africa are putting pressure on crude oil prices. On the electricity market, the price is on the rise again. There, producers and analysts are much more under the spell of CO2 rights.
Brent crude oil began trading at $22 per barrel last Monday, November 79,52. That rose to $82,20 per barrel on Tuesday and remained extremely stable for three days in a row with a difference of up to $0,06. However, today (Friday, November 26) a sharp decline started and the price dropped to $77,23 per barrel. The price is therefore at the lowest level since the end of September.
The decline in the oil market is due to escalating fears about the coronavirus. The newly discovered virus variant in South Africa is causing unrest in the oil market. The variant has already emerged in Belgium and Israel. Traders and analysts assume that international (air) passenger transport will suffer significantly and that the demand for fuel will therefore decrease significantly.
US intervention fails
Remarkably, the price increase at the beginning of this week was prompted by an attempt by the White House to slow the rise in oil prices. President Biden announced that he would bring oil from national reserves onto the market in an attempt to put pressure on the oil price and, in the meantime, curb rising inflation. However, this action had been hanging over the market for a number of weeks and, according to analysts, was already too heavily incorporated into the price. The scale of the American intervention - all in all 50 million barrels, less than the oil consumed worldwide in one day - is simply too small to have an impact on the world market for a long time.
The OPEC+ meeting on December 2 will keep the oil market busy for the coming week. On the one hand, the cartel will not want to antagonize the US further. Not going along with Biden's desired increase in production, but sticking to the monthly increase of 400.000 barrels per day is one thing, but freezing or even scaling down production is very much against American wishes. This puts relations on the world stage on edge. On the other hand, there is a real fear of the new virus variant and OPEC+ may use this as an excuse to tinker with production. They want to prevent a repeat of the scenario like one and a half years ago at all costs.
The diesel price also showed a small price increase this week. On Monday, diesel was €119,93 per 100 litres. That rose to €121,80 on Wednesday, November 24. Today Friday, the price is €120,88 per 100 liters, which is almost €1 off again.
Electricity prices are on the rise again
The fluctuations on the electricity market increased again this week. On Sunday, November 21, the EPEX Spot quotation was €146,76 per MWh. That quickly increased to €254,01 per MWh on Wednesday, November 24. That is the highest level since October 7. Although the price has fallen today, it still remains strong at €197,85 per MWh.
The limited supply of electricity generated by wind turbines is identified by several analysts as the main cause of the relatively high electricity prices. This may change in the second half of next week if the weather reports are correct and the wind actually picks up.
New record price for CO2 rights
Due to the limited supply of green energy, energy companies have been forced to fall back on relatively expensive electricity from coal- and gas-fired power stations. Coal is the most cost-effective fuel. This results in a lot of CO2 being emitted, which is reflected in the market for emission allowances. Yesterday (Thursday, November 25), EU ETS duties stood at €74,46 per tonne of CO2. That is the highest level yet. For comparison: on November 1 the rate was still €56,94 per tonne of CO2.
The new German government coalition also plays a role in the price increase of emission allowances in recent days, according to analysts. Reuters news agency reports that the new coalition wants to set a minimum price of €60 per ton of CO2. In addition, the parties want to phase out coal-fired power stations more quickly, ideally in 2030 instead of the current target date of 2038.