The Ruwais refinery in Abu Dhabi, in an archive image. Christophe Viseux (Bloomberg)
A month and a bloody war later, the situation on the oil market is returning to normal. The price of crude oil has fallen this Tuesday below the level immediately before the Hamas attack on Israel – and the subsequent reaction of the Jewish state -: the less than 82 dollars that a barrel of Brent reached at midday is even lower than the 84 at which it was acted upon shortly before the conflict. And of course of the almost 93 with which it ended on October 19, when the regionalization of the conflict over an oil power like Iran gained momentum. Today, this most dangerous scenario seems much further away.
“The risk of an immediate disruption in supplies from the Middle East has reduced as Israeli military operations are limited to the Gaza Strip,” write Raad Alkadiri, Henning Gloystein and Gregory Brew of risk consulting firm Eurasia in an analysis for clients. “However, any future escalation – whether real or rhetorical – will continue to hit markets and increase volatility.” Meanwhile, lower oil prices are good news in the war against inflation that the West has been waging for months.
More information
As is almost always the case in the economy, there is no single reason for the de-escalation of crude oil prices to their lowest level since August. The forecast of lower fuel production – and thus lower crude oil consumption – at Chinese refineries is emerging as the latest explanation for the decline: In October, the country’s diesel and gasoline exports fell to their lowest levels in four months. But there’s more: both diesel and gasoline consumption, the fuels whose behavior best defines the growth of the global economy, showed relatively lower consumption data than expected in recent days, largely due to weak consumption. European.
“The weak growth of the European economy has hit the manufacturing sector hard,” Alan Gelder, vice president of energy and commodities consultancy Wood Mackenzie, said in a statement to Bloomberg. “This made it possible to reduce both gasoline for the petrochemical industry and diesel for freight transport.” Current expectations are that consumption of both hydrocarbons will be half a million barrels per day lower this year than in 2019, just before the pandemic. Part of this decline is due to the easy replacement of other fuels such as gasoline in transportation. However, another, no less small proportion has to do with the pure destruction of demand, which goes hand in hand with economic underutilization.
Going in the opposite direction was the confirmation 48 hours ago that both Saudi Arabia and Russia – the largest and second-largest crude oil exporters respectively – would maintain their coordinated crude supply cuts unchanged. A cut that aims above all to keep sales prices high and that prevents us from thinking about much larger price drops in the short term.
Follow all information Business And Business on Facebook and Xor in our weekly newsletter
The five-day agenda
The most important business quotes of the day, with the keys and context to understand their significance.
RECEIVE IT IN YOUR EMAIL
Subscribe to continue reading
Read without limits
_