The oil price — a macro driver

Oil is priced globally on ICE Brent (European reference) and NYMEX WTI (American reference) in dollars per barrel (159 liters). Brent is the reference that most affects the Swedish economy because European oil is priced against Brent.

The price is governed by supply (OPEC+, American shale oil, Russian oil) and demand (global GDP, China, energy intensity).

Sweden is a net importer of oil — in 2023 the import value was 60 billion kronor, corresponding to 1 percent of GDP. An oil price increase from 80 to 130 dollars per barrel (as in 2022) costs the Swedish economy 50 billion kronor extra per year, which directly affects the trade balance and inflation.

Swedish industry is also oil-intensive — the transport sector and chemical companies have 5–10 percent of costs in oil.

OPEC+ (including Russia since 2016) controls about 40 percent of world production and meets quarterly to set production targets. When OPEC+ cuts production (as in April 2023 by 1,6 million barrels per day), the price rises immediately.

When OPEC+ increases production, the price falls. These decisions are the most macro-relevant commodity decisions in the world.

The oil price's effects on the Swedish stock exchange are multifaceted. Transport stocks (Maersk, DFDS) are negatively affected by a high oil price via fuel costs. Chemical companies (Borealis, Perstorp) are affected via naphtha costs.

Oil companies (Lundin Energy, Aker BP, Tethys Oil) benefit directly from higher prices. But Swedish export stocks also benefit indirectly via krona weakening when the oil price rises.

The Swedish krona is an oil-sensitive currency — when the oil price rises, the krona weakens as a risk currency, which benefits Swedish exporters. This is a hidden mechanism that explains why Swedish export stocks have often fared better than expected during oil price shocks.

Investors who understand this link have an edge.

OPEC+ meets quarterly (often in Vienna) to decide on production targets. Investors should follow the meeting calendar and the de facto decisions published on OPEC's website. A decision to cut production by 1 million barrels per day usually drives the price up 5–10 dollars within a week.

OPEC's Monthly Oil Market Report (MOMR) is published monthly with demand and supply scenarios.

A more leading variable is American crude inventory data that the Energy Information Administration (EIA) publishes every Wednesday. Inventory drawdowns indicate strong demand or production problems; inventory builds indicate weak demand.

Large deviations from expectations can move the oil price 2–5 dollars in a day.

A third technique is to follow shale oil production in the US, especially the Permian Basin. The EIA publishes monthly production data, and rig counts from Baker Hughes give weekly insight into coming production trends.

When the rig count falls quickly (as in 2020), it indicates coming production declines and higher prices.

Baker Hughes publishes weekly rig counts for the US and internationally. These data are a leading indicator of oil production because it takes 3–6 months from new drilling to production.

When the rig count falls 20 percent over a three-month period, investors can foresee coming production declines and higher prices.

For Swedish investors, the link to oil-sensitive companies is important to understand. Lundin Energy (now part of Aker BP), Tethys Oil and International Petroleum Corporation are direct oil companies on the Swedish stock exchange.

Among indirectly exposed are transport stocks (DFDS, Stena) and chemical companies (Borealis, Akzo Nobel). Investors who combine oil price data with company analysis have a direct edge.