A month and a bloody war later, the waters are returning to normal in the oil market. The price of crude oil has fallen this Tuesday below the levels immediately prior to the Hamas attack on Israel – and the subsequent response of the Jewish State -: the less than 83 dollars that a barrel of Brent reached at noon is, even , below the 84 at which it was trading just before the conflict. And, of course, of the almost 93 to which it closed on October 19, when the regionalization of the conflict involving an oil power like Iran gained momentum. Today, that scenario, the most dangerous, seems substantially further away.
“The risk of an immediate supply disruption from the Middle East has eased as Israeli military operations are being contained to the Gaza Strip,” write Raad Alkadiri, Henning Gloystein and Gregory Brew of the risk consultancy Eurasia. in an analysis for clients. “However, any future escalation – real or rhetorical – will continue to hit markets and increase volatility.” Meanwhile, lower oil prices are good news in the anti-inflationary battle that the West has been fighting for months.
As almost always in economics, there is no single reason for this de-escalation in the price of crude oil to its lowest levels since August. The projection of lower fuel production—and, therefore, lower crude oil consumption—in Chinese refineries emerges as the latest explanation for the decline: in October, its diesel and gasoline exports fell to their lowest point in four months. But there is more: both diesel and gasoline consumption, the fuels whose behavior best defines the growth of the world economy, have in recent days shown relatively lower consumption data than expected, largely due to weak consumption. European.
“The weak growth of the European economy has hit the manufacturing sector hard,” said Alan Gelder, vice president of the energy and raw materials consultancy Wood Mackenzie, in statements to Bloomberg. “This has reduced both gasoline for use in the petrochemical industry and diesel for the transportation of goods.” Current expectations are that the consumption of both hydrocarbons this year will be half a million barrels per day lower than in 2019, just before the pandemic. Part of this drop responds to a simple substitution for other fuels, such as gasoline, in transportation; Another no less minor fraction, however, has to do with a pure destruction of demand associated with economic slack.
In the opposite direction is the confirmation, 48 hours ago, that both Saudi Arabia and Russia—the first and second largest crude oil exporters, respectively—will maintain their coordinated cuts in crude oil supply unchanged. A snip that seeks, above all, to keep its sales prices high and that prevents us from thinking about much greater price drops in the short term.
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