Analysis Energy
Oil market declines due to weaker economy
Negative sentiment has once again taken over the oil market. Concerns about the economy are receiving full attention once more. The American tech company Nasdaq processed its weakest results since late 2022. Due to this economic outcome, the disappointing Chinese economy is also receiving more attention. In addition, swift negotiations in Gaza put pressure on the oil price. However, it seems that Hamas has thrown a spanner in the works.
This week, the oil price has significantly dropped. On Thursday, July 18, the price of Brent oil was $85.11 per barrel. On Thursday, July 25, the price of oil was $81.06. This is a decrease of 4.8%.
After a period of relative optimism about the global economy, the momentum in the oil market seems to have shifted. In the United States, tech company stocks took a significant downward turn. In total, the Nasdaq dropped by more than 2.3%, marking the largest single-day decline since December 2022. Two companies driving this decline are Tesla and Google's parent company, Alphabet.
Tesla's stock decreased by 12.3% after the company announced its lowest profit in five years. This marked the company's worst performance since September 2020. Alphabet's stock decreased by 5%. It is noteworthy that the company achieved its revenue targets. However, shareholders seem to pay little attention to this, as the company's crucial advertising revenues are declining, and the company announced significant investments. Not only are the substantial declines themselves a cause for concern among analysts regarding the broader economy, but Tesla and Alphabet are so large that significant stock declines could have a ripple effect on other companies' stock prices. Adding to the concern is the end of the longest period without declines of more than 2% since 2007.
Chinese Figures Echo
With the weak results in the United States, there is now also more emphasis on the weak Chinese economic results from last week. Last week, the disappointing growth of China's GDP led to a slight decline in the oil market. Data from the Chinese statistical bureau revealed that the GDP had only increased by 4.7%. While this may seem significant, it is relatively weak for the still rapidly developing Chinese economy. The Chinese government has set a target of 5% economic growth by 2024. With the current result, the Asian country is lagging behind the target. Although the oil price reacted to the news, the decline was relatively limited. Now that it has become apparent that the American economy is also facing some challenges, the Chinese results added extra pressure.
Gaza Conflict
Finally, swift negotiations in the war between Israel and Hamas put pressure on the oil price. Israeli Prime Minister Benjamin Netanyahu indicated that a ceasefire deal is taking shape. Egypt, Qatar, and the United States are exerting significant pressure on the Jewish state to reach an agreement with the terrorist organization. Hamas, under the leadership of China, has already reached a deal with the daily administrators in the Gaza Strip, Fatah. The two parties, which until recently were reluctant to cooperate, have agreed to form a new government together. This at least puts an option on the table for who could take over power after an Israeli departure. However, the question remains about the actual progress of the negotiations. Hamas stated on Thursday, July 25, in the press that Netanyahu is not taking a serious position in the negotiations. Therefore, it is uncertain whether the optimistic sentiment surrounding a ceasefire will change.
The price of diesel has also taken a downward turn. On Thursday, July 18, 100 liters of diesel were traded for €129.08. By Wednesday, July 24, the price had dropped to €126.66.
