W.he happy consumer could perhaps not be such a good signal as an indicator for the global economy: The oil price has not only stopped its recovery rally prematurely – it has been falling and falling for a few days. The price of the American variety West Texas Intermediate (WTI) broke the mark of 40 dollars per barrel (barrel of 159 liters) on Friday and stood at a good 36 dollars on Tuesday. After significant losses on Friday, the price of the North Sea variety Brent temporarily lost 1.5 percent on Monday and more than 5 percent on Tuesday – and also broke through the $ 40 limit on Tuesday afternoon.
But the development is not only striking with crude oil. In Germany, the consequences can also be observed for heating oil and fuel. Thanks to the strong euro, both have been relatively cheap lately anyway. But prices apparently keep falling. At some petrol stations, at some times of the day, diesel is already available for less than 1 euro per liter – as it was during the shutdown. In some cities like Kaiserslautern, the average diesel price of all filling stations has even fallen back to less than one euro per liter, as reported by the Clever Tanken internet portal. And heating oil now costs less than 38 euros per 100 liters on average, as reported by the Internet portal Heizoel24. That is the lowest price level in 17 years.
Diesel cheap as in the shutdown
Warren Patterson, oil analyst at the ING bank, sees one decisive factor as the cause: the demand for oil around the world. “The central concern for the market remains demand,” said Patterson. Frank Schallenberger, oil analyst at Landesbank Baden-Württemberg, expressed a similar opinion: “The recent setbacks in the oil price are due to concerns that oil demand will not recover as quickly as initially expected due to the corona in the next few months.”
And Eugen Weinberg, oil specialist at Commerzbank, explained that after an initial recovery in global oil demand after the shutdown in April and May, the demand momentum came to a standstill in some cases – precisely at the moment when the oil countries started their oil production again increase. This became clear, for example, with the end of the summer travel season in America, which traditionally ends with Labor Day, and in which less gasoline was used than expected. The season was “disappointing”.
Concerns about oil demand
Giovanni Staunovo, oil analyst at the Swiss bank UBS, said that there was a combination of various factors that put the oil price under pressure. It is possible that the oil price, which had temporarily risen again to around 45 dollars after the shutdown, was in the meantime exaggerated (“overshoot”). In addition, there is currently a certain risk aversion among investors, which is also evident on the stock market. Renewed tension between America and China was cited as one reason on Tuesday. The dollar, which is somewhat stronger than the lows, should also play a role in the oil price trend, said Staunovo. However, it was certainly not helpful for the oil price that Russian Deputy Oil Minister Pavel Sorokin had now said that it would take a proud three years for the demand for oil to recover. The lower Chinese oil imports were also interpreted as a bad sign for the development of global energy demand.
Several analysts said, however, that they do not rule out that the oil cartel Opec will now react to the weak oil price and at least “intervene verbally”. Saudi Arabia, for example, it was speculated, could try to push the oil price up a little with words.
The exciting question remains: does that have to worry if the oil price is low because the global economy is not picking up as expected? In any case, Oliver Klapschus from the Internet portal Heizoel24 suggests in his daily market report that the oil market sometimes reacts faster than the stock market to weaknesses in economic development: “Experience has shown that oil prices will show very quickly whether the price level reached is covered by demand, or not whether the correction continues to pick up speed. “
This could potentially be of concern to equity investors as well. However, significant price losses were also evident on the stock market on Tuesday. Holger Schmieding, as chief economist at the Berenberg bank, was more interested in the general economic development than in the details of the oil market, said: “For me, the oil prices are not a big issue.” The decline in the oil price is more driven by the oil market than the economy. “Other indicators show that the recovery is flattening out somewhat, as expected – but there are no signs of stagnation or even a new recession.”