Oil & Fuel update – 17 July

Look Back

Since June 28th of this year, the Brent Crude Market has seen a consistent increase in price per barrel for oil, increasing 8.4% in this time frame from circa $72/barrel to around $78 a barrel, whilst breaking the $80 mark late last week for the first time since May of this year.  

Both Russia and Saudi last week also announced further Production cuts for crude oil exports with Saudi aiming to “restore balance” and reduce volatility to the global markets, along with other members of the OPEC Cartel attempting to reduce production too. However as demand increases for the winter months, this poses a question as to where prices will end up by the start of 2024, with Goldman still holding a firm view that prices will hit the $90 / barrel mark as supply tightens.

Furthermore, the Pound continued to strengthen against the dollar as of last week with data suggesting that the UK inflation rate is on course to drop to its lowest level in over a year, with the rate of price growth in Britain top have dropped to 8.2 per cent as of June. As of Monday, Stirling has risen 0.1 per cent and has broken the $1.31 mark.
Look Ahead

As markets opened on Monday morning Brent Crude was trading at the $78 / barrel mark. This price fall of around 1% from closing prices on Friday due to weekend data coming out of China reporting second quarter economic growth has fallen below expectations.

This news is in light of chinses GDP Figures growing just 0.8 Percent in three months, yet boosts were expected as the country reopened properly as a recovery measure from their Covid-19 restrictions. In terms of looking forward, expectations are for the world’s second largest economy to slow further. Beijing is also expected to exercise caution on any further measures to dramatically boost growth due to concerns about the exponential effects.

However, operations in Libyan oilfields, which shutdown over recent days as a result of protects related to the abduction of a former finance minister, have now resumed, along with Shells temporary halt on Nigerian crude exports starting up again, both of which were factors tightening supply.

On Wednesday, UK Inflationary data will be released on Wednesday with GDP numbers expected to grow by 0.6 per cent in 2024 and economists expect Rishi Sunak will hit his target of halving inflation by the end of the year from 10.5 Per cent. Predictions suggests figures released on Wednesday will still show inflation at above 8 per cent.

Overall, the situation in the west along with Russian and Saudis continued supply cuts will impact prices in the short term, and UK inflationary data will see a positive outlook for the economy to reach a stable point of growth, even if prices are still at a “new normal”.

Foenix Partners, 26 Curtain Road, London, EC2A 3NY