“This year the price of crude oil was significantly more stable than last year. If last year the price of oil was between 80 and 130 USD/b, this year the price level was mostly around 80 USD/b. If you look at the arithmetic average of the oil price, in 2022 it was 99 dollars a barrel, but this year it was 82 dollars a barrel”, compared Indrek Sassi, head of fuel prices for motors in Circle K Estonia. He stressed that the biggest factor influencing prices in 2022 was obviously the war in Ukraine, which shook existing supply chains. This year, according to Sass, prices have been influenced by high interest rates, the general economic situation and OPEC’s efforts to keep prices at an affordable level.
“It can be said that the year started on a rather optimistic note on the world market, as it was hoped that China’s abandonment of long-standing severe restrictions against Covid-19 would give a boost to its economy and that demand for oil, and therefore the price of oil would increase,” Sassi said.
At the same time, inventories of finished motor fuel products in the United States and Europe have grown rapidly, and in Europe the opportunity to fill warehouses to the brim before the ban on the export of refined petroleum products has been widely used of Russian origin, which will come into force on February 5. “So in February 2023 diesel inventories in Europe were above the average level of the last five years,” Sassi said.
In March, increasingly skeptical notes began to emerge in the forecasts regarding the possibility of an economic recovery. “When at the beginning of the year it was hoped that the economic indicators of the large countries would slowly move towards economic growth, first the difficulties of the American banks and then also the European ones rightly frightened the financial markets, and it occurred increasingly of imminent banking collapse and general economic recession. All this has also had a negative effect on the price of oil”, said the head of fuel prices.
However, the drop in oil prices did not sit well with OPEC, and in June, Saudi Arabia announced a voluntary production cut of 1 million barrels per day. Russia also reduced its export volume. “OPEC tried to regulate the price of oil with cuts and bring it above the level of 80 dollars a barrel, but due to high interest rates and the cooling of the world economy, these decisions did not have a significant impact on the price of crude oil, and in September Saudi Arabia announced the extension of the cuts until the end of the year”, explained Sassi.
In October the markets were shocked by the Hamas attack on Israel. Although Israel is not an oil producer, the situation also had repercussions on oil markets as there were fears that the conflict could spread to the region. Fortunately, the conflict did not escalate and the price of oil was not affected.
According to Sass, in the last months of the year, the price of oil on the world market was mainly influenced by the record level of US oil production, while global demand was steadily declining. According to Sassi, OPEC’s policy of cuts under the leadership of Saudi Arabia has deepened the differences between the countries belonging to the association: “Despite the production cuts, it has not been possible to maintain the price of oil at the desired level, and so at the end of the year, after the postponed OPEC meeting, unlikely reports on cuts came out. However, the forced production cuts did not please Angola, which has been a member of OPEC for 16 years, and announced its left the association in December.
As at the beginning of the year, markets will be closely monitoring what happens in China at the end of the year, as China is the largest oil importer. “Unfortunately, the forecasts are no longer as optimistic as they were at the beginning of the year. The rating agency Moody’s has lowered China’s credit score and the hope that the Chinese economy will return to growth tends to fade,” he said. said Sassi.
However, OPEC’s latest market forecasts highlighted that demand growth will outpace volume growth from non-OPEC producers next year, with a supply deficit expected by 2024. According to OPEC forecasts, the increase of demand growth is expected to come primarily from increased economic activity in China. The US Energy Information Administration (EIA) also forecasts supply below demand for the first quarter of 2024 based on OPEC’s latest cut plan. At the same time, the global economic situation and falling demand make the markets rather cautious, and according to the latest EIA forecasts, the average price of Brent crude oil in 2024 is expected at a similar level of USD 82.57/b to 2023.
Circle K Eesti AS belongs to the Canadian international group Alimentation Couche-Tard Inc. Alimentation Couche-Tard Inc. is one of the world’s leading retail groups, operating in 24 countries and operating 14,332 service stations worldwide. The company employs a total of over 122,000 people.
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2023-12-28 17:00:00
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