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Analysis Energy

After a brief decline, the oil price is rising again

April 25, 2024 - Matthijs Bremer

The oil price remained fairly stable until midweek. Particularly relative calm on the geopolitical front contributed to stability. However, on Tuesday, April 18, the price rose sharply. Remarkably, this turned out to be the result of weak economic data in the United States.

Earlier this week, the lower oil price held steady, but now Brent oil is trading higher again. On Thursday, April 18, oil changed hands for $87.11 per barrel. Especially between Tuesday, April 23, and Wednesday, April 24, the oil price rose significantly. During that time, the price increased from $87 to $88.30.

An important reason for the initial slight drop in the oil price was the relative calm on the geopolitical front. The main reason was the relatively small response of Israel to the Iranian missile barrage. Last Friday, Israel retaliated by sending three drones to the city of Isfahan. This allowed Iran to shoot down the drones, enabling the country to claim that the attack was not significant. It seems that the Jewish state has found a way out of the escalation spiral. This gives the oil market confidence that further escalations between the two states are currently off the table.

American market
Developments in the American market later in the week, however, provided support for the oil price. Part of this can be attributed to favorable figures from the industry. Recent data from the American Petroleum Institute (API) shows that American oil inventories have decreased by roughly 3.2 million barrels. Meanwhile, the market expected an increase of 1.8 million barrels, according to a Reuters survey. Analysts indicate that demand is stronger than expected.

This is a big relief, especially considering relatively weak economic data. On Tuesday, April 23, Standard & Poor's Global announced that the American Purchasing Managers Index has dropped this month from 52.1 to 50.9. A figure above 50 indicates growth, while a figure below indicates contraction. Although there is still growth, there is clearly a weakening compared to a month ago. This leads to a somewhat paradoxical development. Usually, a weaker American economy leads to a lower oil price, as it often goes hand in hand with reduced consumption. However, on Tuesday, this led to a significant increase, as the market believes that the decline brings a rate cut closer.

Economic figures ambiguous
The weak economic data from the United States quickly proved to be an unstable foundation for the rise. However, a day later, the reality of the weak economic data caused a decline. Interestingly, market analysts now use this argument to explain the decline.

Meanwhile, the diesel market is actually declining this week. On Tuesday, April 16, 100 liters of diesel were priced at €133.63. The price then decreased, reaching its lowest point on April 22. On that day, the price dropped to €129, only to rise again the next day to €129.92.

Matthijs Bremer

Matthijs Bremer is a market specialist in pork, beef, and poultry meat at DCA Market Intelligence. He also monitors the protein transition, keeping an eye on developments in cultured meat and meat substitutes.
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