2023-07-29 08:28:52
How far will the oil go? Will it soon reach the threshold of 100 dollars a barrel? At this stage, there is only one certainty: oil prices have been firming up significantly for several months. Take the barrel of Brent, “THE” European benchmark for oil prices. With the outbreak of the war in Ukraine, at the end of February 2022, the barrel of Brent had largely exploded the threshold of 100 dollars. It had even briefly exceeded 120 dollars before gradually falling back and hovering around 70 dollars. But in recent weeks, prices have started to rise again. A barrel of Brent is now trading at more than 83 dollars.
Demand picks up again, prices follow
Energy prices are intimately linked to the health of the economy. Simply put, the stronger the economic growth, the more energy is needed – not just oil, by the way – and the more prices tend to rise. It is therefore no coincidence that OPEC, the Organization of the Petroleum Exporting Countries, is counting on a persistent rebound in the Chinese economy to support the growth in oil demand in the second half of this year but also in 2024.
Reduce production to boost prices
That said, the OPEC + countries (OPEC and its allies, including Russia) do not rely only on the spontaneous mechanisms of supply and demand to obtain higher selling prices: they also announced production cuts. In particular Saudi Arabia, which decided to lower its production by around one million barrels of oil per day in July. It is, officially, “bring stability to a market“extremely volatile. Free translation: to raise oil prices. In any case, the OPEC + countries must meet next week. One of the issues of this meeting will be to know if Saudi Arabia will extend – or not – the voluntary reduction of its own production.
A hyper-speculative market
It must be said that the black gold market is regularly “victim” of bouts of speculative fever. In any case, this is the analysis of Canadian Eric Nuttall, partner and senior fund manager of the firm Ninepoint Partners: “This yearhe said, there were two episodes where oil prices collapsed by $10 to $15 in a single week with no connection whatsoever to oil supply or demand! It was only linked to a demand for financial products linked to these barrels, nothing to do with a demand for physical delivery of oil. This is an extremely important distinction that everyone should keep in mind: the financial market for oil is 30 times larger than the physical market.“.
A barrel at 100 dollars in the second half?
It is therefore a formidable playground for speculators of all kinds… Which also regularly causes a disconnection between what Eric Nuttall calls “oil fundamentals” – supply and demand for physical oil – and quotations on the financial markets. But, at some point, the fundamentals end up imposing themselves. And this is the conviction of this specialist consultant: the prices of will rise in the second half of the year as demand (particularly in Asia) continues to strengthen and, above all, as available oil stocks sink to extremely low levels: “We think we’ll end [2023] with inventories at an 8-10 year low, and these inventory levels suggest a significantly higher oil price [qu’à la mi-juillet]“. Adding in passing his belief that “we are in a multi-year bull market for oil“. Not good news for consumers.
Heating diesel already more expensive…
In any case, it suffices to take a look at the bill for heating oil or for refueling to see that the rebound in oil prices has indeed already begun. For a delivery of less than 2000 liters of heating oil, it is necessary to count 0.9772 euro per liter from July 28; it was 0.8007 euro per liter on May 5th. An increase of 22% in three months… Those who heat themselves with oil will no doubt console themselves by remembering that at the height of the energy crisis in 2022, the price per liter had reached 1.5558 euros.
… and fuels too
Fuels are also more expensive at service stations. The maximum price per liter of diesel is currently 1.855 euros, compared to 1.678 euros at the beginning of May. That’s a 10% increase. But here too, we are far from the peaks of 2022 (2.155 euros per liter of diesel in June 2022). As for 95 RON E10 unleaded gasoline, its maximum price was 1.848 euros on July 27, very far from the peaks of 2022 (2.239 euros on October 18) but, closer to us, in mid-May, the liter of unleaded 95 sold for a maximum price of 1.731 euro. In a few months therefore, the precious liquid is sold 6.7% more expensive.
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