European Oil Prices Remain Near $100 per Barrel Amid Uncertainty

The European oil market is facing uncertainty as Brent crude prices remain near $100 per barrel. JPMorgan analysts warn that they can no longer model the end of the crisis, and even a Brent price of around $90 was estimated to be compatible with September's supply and demand data. The U.S. Energy Information Administration expects elevated prices until Middle East oil trade is restored and reserves are replenished.

Oil reserves offer little protection against price increases, with global inventories falling by 95 million barrels in August, bringing the total decline since February to 507 million barrels. Global oil supply is projected to average 100.7 million barrels per day in 2026, down from a year earlier. The situation is particularly dire for countries like Hungary, where diesel stocks are depleting rapidly.

Price transmission is swift, with research by the Bank of Slovenia showing that a 10% increase in Brent price leads to an approximate 6.5% increase in pre-tax diesel prices and 6.2% in petrol prices. Refining margins can further amplify the shock, with ECB staff estimating that refinery margins contributed around 41 euro cents per liter to the retail price of diesel in mid-September.

European governments are responding with patchwork measures, including caps on retail prices, cuts in excise duties, and financial aid for farmers, hauliers, and other large fuel consumers. Germany is cutting its energy tax by 14 euro cents per liter from October 1 until the end of the year as part of a €2.5 billion package.