Nothing represents the world in one number like the price of oil. It contains everything: the global economy, climate efforts, war and peace, people’s self-confidence and pessimism. It is not surprising that recent massive geopolitical turmoil has also repeatedly pushed up oil prices. Sometimes fear of escalation in the Middle East causes him to rise. Sometimes it was the result of confrontation with Russia and related sanctions from the West that caused its growth to skyrocket.
Currently, oil prices have become quite cheap again. Political turmoil never lasts long. The assessment that a weak global economy will likely lead to lower global oil demand has been repeatedly put forward. Especially since on the supply side, the OPEC oil cartel is happy to expand production. North Sea Brent oil was priced at $61 a barrel (159 liter barrels) on Monday, while the price of American West Texas Intermediate, or WTI for short, was just under $58. For comparison: In June, Brent was temporarily $16 more expensive, even WTI was $24 more expensive. Oil is now cheap again.
“A vague hope for peace”
Frank Schallenberger, oil analyst at Landesbank Baden-Württemberg, blamed the recent price drop on talk about a possible end to the Ukraine war. “If peace efforts are successful, sanctions against the Russian oil industry must be lifted immediately,” Schallenberger said. According to his estimates, due to the expansion of production by oil-producing countries, there is already a very high supply surplus in the oil market, around three million barrels per day this quarter. If sanctions against Russia are lifted, this value could increase even further in the first quarter of 2026.
Even in the short term, the possibility of peace in Ukraine could lead to an oil glut, Schallenberger said. Since November 21 there have been sanctions against Russian oil companies Lukoil and Rosneft. “It is estimated that around 50 million barrels of Russian oil are currently blocked in tankers.” With sanctions lifted, these products will probably hit the market very quickly. “There is too much oil on the market right now – and with peace in Ukraine, the oversupply will increase even more,” Schallenberger said. Therefore, the analyst believes it is likely that the Brent price of $60 per barrel will soon be “tested”. Of course, no one yet knows whether the negotiations will be successful; it certainly won’t be easy. Therefore, Cyrus de la Rubia, economist at the Hamburg Commercial Bank, also spoke about the “vague hopes for peace” currently putting pressure on oil prices.
Consumers have so far benefited little from these developments. Of course it is not bad for the development of heating oil and fuel prices if oil prices fall. However, similar developments have not been seen there. According to figures from the Internet platform Heizoel24, where 500 oil traders report their prices, the price of heating oil was 94.82 euros per 100 liters on Monday, when 3,000 liters were purchased. That number was slightly less than last week, and there was also a pullback on Friday. However, heating oil costs are much more expensive than July to October, perhaps due to the heating season and low temperatures. A year ago, heating oil prices were around the same level as they are now.
Meanwhile, fuel prices experienced different developments. The price of diesel is increasing every week and, according to figures from the internet platform Clever Tanken, recently reached an average of 1,662 euros per liter. That’s more than happened all summer; the last time diesel was as expensive as it is now was in February. Super E10, on the other hand, becomes cheaper during the week. One liter recently cost an average of 1,682 euros.
“Crude oil prices have been falling since the middle of the year – calculated in dollars and euros,” said Jörg Krämer, chief economist at Commerzbank: “Nevertheless, consumers are paying less for diesel and heating oil.” This difference is likely due to two factors, the economist said. On the one hand, diesel and heating oil stocks in the United States were very low at the start of the heating season. This has raised concerns that the US will export less oil products such as diesel. “On the other hand, Ukrainian drone attacks on Russian refineries have reduced diesel production there, so less Russian diesel can be exported,” Krämer said.
This development is now also being followed by the European Central Bank (ECB). Central bankers want to undervalue oil prices because oil prices fluctuate frequently; however this is only possible to a very limited extent. One way to look at inflation without oil is what is called core inflation, which is inflation without very high fluctuations in energy and food prices. ECB economists often pay attention to it. At 2.4 percent, the figure is currently higher than headline inflation of 2.1 percent.
However, if oil prices remain low for a longer period of time, this important figure will also be reflected in other prices as energy prices are an important part of production costs for many companies. So it’s hard to ignore oil prices. Of course we don’t know how long oil prices will remain low. Giovanni Staunovo, analyst at major Swiss bank UBS, expects the rate to stay the same in the short term – but to rise in the middle of next year.
“Negative risks” to inflation
At least it is being discussed among economists whether long-term low oil prices, a weakening economy, a stronger euro, and a possible delay in European ETS2 emissions trading could cause the ECB to lower its inflation forecast. In this context, central bankers talk about “negative risks” to inflation. The ECB has not put much emphasis on this. However, Karsten Junius, Economist at Bank J. Safra Sarasin, believes that currently there is more risk of deviation from expectations in this direction. The central bank currently forecasts an inflation rate of 1.7 percent for next year and 1.9 percent for 2027. The new inflation forecast, which will then be extended to 2028, will be available at the ECB Council’s next interest rate meeting on December 18.
It is likely that the central bank will leave interest rates unchanged at this point. The statement from the ECB Governing Council does not actually allow other conclusions to be drawn. The most important main interest rate, the deposit interest rate, which also has a certain influence on savings interest rates, is currently at 2.0 percent.
