"The price of a barrel of crude oil exceeded 85 dollars. Drivers are worried, not only about rising raw material costs, but also about the strength of the American currency. It can be expected that in the next few days, the price of diesel will increase by 0.15-0.20 PLN per litre and will reach levels unseen for 4 years," writes Marcin Lipka, Conotoxia Senior Analyst.
Oil quotations are becoming ruled by fear more and more. Above all, these are fears about Iran's export opportunities following the imposition of American sanctions. By any means, the sales of this basic raw material from the Islamic Republic have already collapsed. This is indicated, for example, in the data on oil tanker movements.
In April, just before the U.S. administration decided to impose sanctions, Iran's oil exports based on tanker traffic reached 2.8 million barrels per day (b/d). Currently, according to the latest calculations presented by Bloomberg, it has fallen to 1.72 million barrels per day. A loss of more than 1 million b/d is a lot. In addition, this is just the beginning of the problems, because formally the sanctions will come into force in a months time.
FGE (Facts Global Energy) data, quoted by the Financial Times, indicates that Iranian exports could fall to one million b/d in mid-2019. South Korea has already resigned from Iranian oil for fear of American repercussions, while Japan is importing marginal quantities of Iranian oil.
Tehran is likely to export much less oil to India. Chinese purchases may also decrease significantly. Both countries have bought 700-800,000 b/d each so far. It is worth remembering that losses in Iranian oil exports must be compensated for by other producers. Unfortunately, several countries rich in this raw material are experiencing problems that prevent them from making full use of black gold resources.
Market tensions and the strong dollar
The fact that oil production from Venezuela continues to decline is also a threat to fuel consumers. According to OPEC data for September, it fell to 1.26 million b/d. This is 700,000 b/d less than a year ago. The situation in Libya is a major source of uncertainty. Despite the increase in production last month, the unstable political situation in Libya is causing sudden and frequent drops in production, even by as much as 300-400,000 b/d.
Saudi Arabia produces more oil, but the country's spare production capacity is shrinking significantly. This, in turn, exacerbates the fear that in the event of unexpected supply problems (natural disasters, breakdowns, strikes) there will be fears about the possibility of continuously satisfying the ever-increasing global demand.
Drivers in many countries may also find the dollar to be quite strong. In Poland, the American currency is worth about 3.70 PLN, which means that the price per barrel of oil reaches 316 PLN (in one week it increased by 10%). In addition, this is only 8% less than the average oil price expressed in PLN between mid-2012 and June 2014 (343 PLN), when the average price in the global market was 109 USD.
Diesel hits new highs. It will be more expensive than petrol
The situation in the oil market will quickly translate into prices at petrol stations. This will be particularly evident in the case of diesel. This fuel in the ARA (Amsterdam-Rotterdam-Antwerp) market has increased by 0.20 PLN since September 21st, reaching the level of 2.35 PLN per litre.
Comparing the wholesale market values with the European Commission historical data on retail fuel prices, it can be expected that in Poland we will pay an average of 5.20-5.25 PLN per litre of diesel in the first half of October, which is the highest price in 4 years. The price increases of ARA petrol do not exceed 10 PLN, which means that diesel, at most stations, will be a few pennies more expensive than the popular ‘95’.