Analysis Energy

Oil price rises extraordinarily strong

June 13, 2024 - Matthijs Bremer

After the low point of last week, the oil price has almost completely recovered within a week. The value increased as the US Department of Energy expects demand to rise in the United States. However, fluctuations in exchange rates since Thursday have reversed the trend.

This week, the oil price has risen by over 3%. On Thursday, June 6, oil was traded for €79.87 per barrel. On Thursday, June 13, oil dropped to €82.38 per barrel.

Looking at last week's low point, the increase is even more significant. On Tuesday, June 4, oil was traded for €77.52 per barrel. Compared to that point, the price rose by over 6% on Thursday, June 13. This is an unusually strong increase for the oil market. Last week, the oil price fell after it became clear that OPEC had opened the door to slightly higher production from the fourth quarter. The reason the market reacted so strongly was that the US oil market was already out of balance. In that country, supply exceeded demand.

Since the low point, confidence in the oil market has recovered significantly. This is mainly because the market expects demand for oil to increase significantly and quickly. In the summer, the number of flights increases, leading to a sharp rise in demand for kerosene. Particularly in the United States, demand is rising sharply, leading traders to believe that the market will rebalance.

Additionally, the US Department of Energy has revised its forecast for oil market growth upwards. Demand is expected to increase by about 1.1 million barrels per day by the end of the year compared to 2023. This is an increase of 200,000 barrels per day compared to the previous forecast. According to the department, by the end of 2024, demand for oil will be about 800,000 barrels per day higher than supply.

Exchange Rates
On Thursday, the rise in the oil price was interrupted. An important reason for this is a change in exchange rates. The value of the euro has fallen this week after French President Emmanuel Macron announced elections following a strong victory over the populist politician Marine Le Pen. Meanwhile, the dollar has become more expensive than other currencies. Since oil is traded in dollars, the rising value of the US dollar makes oil more expensive for markets outside the United States. This has negative consequences for demand.

Furthermore, it did not help that oil reserves in the United States have once again increased. A total of 3.73 million barrels were added to storage. The market's expectation was that the reserves would decrease by 1.55 million barrels after the increases of recent weeks. This has a significant impact on the market, as the US oil sector has been struggling to balance reserves throughout 2024.

The diesel price has also risen significantly. On Thursday, June 6, oil was traded for €124.34 per 100 liters. By Wednesday, June 12, the price had risen to €128.52.

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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