By Chrysostomos Tsoufis

Inflation in the country fell in April to the lowest point of the last 12 months and this is due to the decline in energy costs. And besides natural gas, the contribution of oil is also important. From $87 on April 12, the 2nd highest price in 2023, the price of black gold had fallen as low as $72 on May 5, a 17% drop, and would have remained in that region had it not been for wildfires in Canada which reduced the production as a result of which the price of oil… stings at $76.

The fall in the international price is of course welcome, but the reasons behind it only cause concern:

  • The fear of recession which is of course related to the interest rate cuts decided by the central banks – although the head of the FED Jerome Powell left a window open for them to stop -. But the ECB will continue, especially when inflation increased, even marginally, in April according to the first data. The data also show that in the first quarter the Eurozone barely escaped recession, while growth in the US slowed significantly and it faces default if Republicans do not agree to raise the country’s debt ceiling.
  • The news from China is not as expected. The economy has opened up, after moving away from the policy of zero infections, but the performance is disappointing. Energy imports are not satisfactory either, while the rates of energy exports portend difficult days. Even figures for manufacturing activity showed an unexpected contraction.
  • Russian energy production is alive and kicking, as sanctions don’t seem to have hit it as hard as the US and its allies in Europe and the G7 thought. In the first five months of the year, the EU has bought $15 billion worth of oil from Russia, which at the same time has increased its exports to third countries. Therefore there is a supply in the market resulting in prices being depressed

Nevertheless, a large portion of analysts expect a recovery in international prices in the second half of the year. The following arguments stand out from their argumentation:

  • That $70-$72 is the bottom of the barrel and market conditions do not warrant further decline.
  • As the summer season approaches, the number of trips will increase and therefore the demand for fuel and oil will increase.
  • China, which currently acts as a factor in reducing prices, in the future, according to the relevant analyses, will act as a factor in increasing them. Economists expect an awakening of the Chinese dragon from autumn onwards.

What almost everyone agrees on is that the moods of the black gold will be determined by interest rates and economic growth, but also by the course of the Russian-Ukrainian war. Factor X is OPEC, which at any time can intervene and increase or decrease production and affect prices accordingly.