The price of a barrel of Brent crude oil, the benchmark in Europe, has been stuck at $70 for weeks, something not seen since the pandemic. In mid-2022, with the recovery underway, a barrel of crude oil was at $120, almost double. The collapse is due to the prospects of a slowdown in demand, especially in China, the world’s largest oil importer, due to the weakening of the Asian giant’s economic data and its rapid electric transition, with a high penetration of plug-in vehicles, encouraged by the regime’s checkbook. The drop in demand means that the level of fuel inventories (commercial reserves) is at its limit, as in the United States, which pushes prices down due to the stored surplus. Faced with this situation, the OPEC+ oil cartel, led by Saudi Arabia and Russia, decided a week ago to postpone its plan to lift the reductions in its crude oil production by two months, until December 1.
The aim: to contain the fall in prices, which were on the verge of falling below the $70 per barrel barrier for OPEC crude oil. Prices have thus rebounded, but are still below the average price forecast for the year. Brent has managed to stabilise around $72.6 and many consumers are confident that this situation will help prolong the fall in fuel prices.
In the last week, fuel prices reached levels not seen since 2022, even before the invasion of Ukraine in the case of diesel, with recent falls of 1.35% for gasoline and 1.26% for diesel. Diesel was paid on average at 1.406 euros per liter in its eighth consecutive decline and is the lowest price since the week of January 24, 2022, before the Russian invasion of Ukraine, according to the European Union (EU) Petroleum Bulletin. Gasoline recorded its lowest price since the last week of 2022, when the 20-cent discount was applied as public aid, with an average of 1.53 euros per liter compared to 1.383 euros almost two years ago. Excluding discounts, gasoline reached its lowest price since January 24, 2022, when it stood at 1.52 euros per liter.
However, the outlook does not suggest that the price decline will continue. However, the International Energy Agency (IEA) has revised downwards its forecast for global oil demand growth due to the sharp slowdown in the Chinese market. The IEA now estimates that global demand will increase by 900,000 barrels per day in 2024 (to 102.99 million), when a month ago it estimated a growth of 970,000 barrels.
Does this mean that the price of crude oil will continue to fall? Analysts do not expect the current situation to continue. In fact, they expect a rebound within weeks. At least this is the estimate of the US energy authority (EIA). In its latest forecast update, which takes into account these parameters of the IEA, it considers that, although prices have remained volatile this year, the swings have occurred within a narrow range.
Despite the fall in September, the US energy agency indicates that “we expect that the continued withdrawals from global inventories as a result of the production cuts announced by OPEC+ will bring prices back to previous levels relatively quickly.” In fact, the EIA predicts an average range of $83 per barrel of Brent for this year and $84 for next year, far from the $101 in 2022, but above the price range considered “moderate”, between $60 and $70. What does seem clear is that prices will not rise above that average of $83. “Global problems have reduced expectations about demand. Weak activity, reduced demand from China and slow progress in the US labor market limit an upward push for prices in the coming months,” adds the EIA.