If you haven’t filled up your tank with gasoline or diesel since the end of June, and you’ve done it again now, you’ll find that prices are higher. As much as 10% to 15% more. You may think that it is the ‘rocket-pen effect’ linked to the holidays at the gas stations -prices rise at the beginning of the period and decrease at the end-, but the tensions this time come from the wholesale markets both from the supply side and from the demand. Refiners are preparing for higher prices for the base raw material: oil.
The pressure returns to the energy market at the equator of the peak road travel season in the northern hemisphere, when more conventional car fuels are consumed. Also due to the entry into force of the production cuts imposed by Saudi Arabia and Russia at the last OPEC+ meeting in order to keep crude oil prices high. And a third factor is also driving the expectations of energy sellers: both the US and Europe seem to have gotten a hint of a ‘soft landing’ for their economies at the end of the rising interest rate cycle for both.
According to the data collected by the portal dieselogasolina.com from the database of the Ministry of Ecological Transition, unleaded 98 gasoline has gone from 1.77 to 1.85 on average in the month of July, while unleaded 95 has risen from 1.59 to 1.67. For its part, A+ diesel started the month at 1.55 and ended it at 1.63, while normal diesel rose from 1.44 to 1.52. For the first time since April, the barrel of Brent oil has risen more than fuel, a movement that represents the prelude to an increase in refined products, according to experts.
The barrel shoots up 14% in July
The fact is that the reference barrel in Europe, type Brent from North Mars, has just closed in July with an accumulated rise of 14%, the most bullish month since January 2022 when it rose 17% before the start of the war from Ukraine. Its price closed this Monday at 85.4 dollars, its highest level since April. The US West Texas (WTI) reference has also climbed in the same proportion to consolidate above $81 at the start of the week.
Paradoxically, the rapid increase in oil prices has coincided with investment statistics that point in the opposite direction. Oil exchange-traded funds (ETFs) posted the largest exits or redemptions of these investment vehicles in more than a year, led by a record withdrawal of the largest ETF from the crude oil market.
Investors withdrew nearly $200 million in a single day from WisdomTree’s Brent oil product, which in January became the industry’s largest, Bloomberg reports. That is the largest outflow of funds since it began operating. There were also withdrawals from other similar instruments, with the United States Oil Fund experiencing its biggest weekly outflow since December.
These movements occur after the rally registered in the prices in July and the improvement of the macroeconomic outlook. Brent oil futures continue to point higher on the back of a strong demand outlook after first quarter doubts, OPEC+ supply cuts and growing confidence in the macro outlook, as traders bet that increases in Fed interest rates could be coming to an end.
The tail effects of OPEC+ cuts
Approximately 2 months ago, the OPEC+ countries -which includes Russia- reaffirmed their commitment to adjust the level of total crude oil production to 40.46 million barrels per day for the whole of 2024. OPEC members alone will account for 24.99 million, slightly more than 60% of the main oil exporting powers globally, while the countries outside the cartel will group a supply of 15.4 million daily.
According to the new production quotas granted for the year 2024, Saudi Arabia will continue to lead cartel two (3.2 million), Kuwait (2.6 million), Mexico (1.7 million), Kazakhstan (1.6 million), Nigeria and Angola with 1.4 million each, and Algeria with 1 million.
However, despite this decision, concerns about demand remained, mainly from China, the main importer of crude oil. These concerns will continue in market sentiment and uncertainties will emerge in the commodity markets. However, the latest growth data in the US (2.4%) have exceeded expectations and, at the same time, the possibility of rate hikes by the US Federal Reserve (Fed) seem less now after the last move. of July.
On the other hand, the attention of other producing countries was focused on Russia and its overproduction, which exerted downward pressure on prices outside of the quotas and agreements assigned within the cartel. Some countries pointed to the Putin government’s bilateral oil supply deals with China or India as a possible cause of the nearly 50% drop in prices from the peaks reached in 2022, despite the fact that demand generally remained sufficient. strong enough. The situation required greater attention and cooperation among producing countries to maintain stability in the international oil market. But there is a maximum oil: when prices rise, crude oil comes out everywhere, especially from those countries where it is more expensive to extract.
