The complex and volatile situation in the Middle East has not intensified as expected, leading to a sharp drop in international oil prices on the 8th, and the $80 per barrel mark was lost again. Experts interviewed believe that it remains to be seen whether the situation in the Middle East will get out of control. Coupled with weak global economic demand, the possibility of a short-term spike in oil prices is slim.
International oil prices lose the $80 mark.
As the situation in the Middle East did not further escalate, the nerves of the global market, which were on edge, were temporarily relaxed. International oil prices plunged sharply after five consecutive days of gains. As an important benchmark for international crude oil pricing, WTI crude oil futures fell by $3.57 on the 8th local time to close at $73.57 per barrel, a decline of 4.63%; London Brent crude oil futures prices fell by $3.75 to close at $77.18 per barrel, also a 4.63% decline.
According to Guosen Securities, the average price of Brent crude oil in September was $72.9 per barrel, and the average price of WTI crude oil futures was $69.5 per barrel. Since October, the tension in the Middle East has been continuously heating up. Iran launched a large-scale missile attack on Israel, and international oil prices rebounded sharply and returned to above $80 per barrel. In the past five trading days, international oil prices have continuously risen by more than 10% and had risen to $80.9 and $75.5 respectively before the decline on the 8th.
Although oil prices have fallen, the situation in the Middle East is complex and changeable, and international oil prices may still fluctuate significantly. CNBC website reported on the 9th that after the outbreak of the Palestine-Israel conflict on October 7 last year, the disruption to the global oil market was once minimal. But recently, a subtle change is taking place in market sentiment. Last week, due to concerns that Israel might target Iran's oil industry in retaliation for Iran's missile attacks, oil prices had soared sharply. Many industry analysts expressed concerns that the oil market supply might be truly threatened. During trading on the 8th, international oil prices also fluctuated wildly due to various rumors about the situation in the Middle East.
Multiple factors lead to a sharp drop in oil prices.
According to comprehensive reports by US media, there are two main reasons for the sharp drop in international oil prices on the 8th: First, as a response to last week's missile attacks, Israel will focus on Iranian military facilities, which reduces market expectations that Israel will attack Iran's oil facilities. Second, the US Energy Information Administration (EIA) lowered its global crude oil consumption growth forecast for 2025 from 1.5 million barrels per day to 1.3 million barrels per day in its monthly outlook report and lowered its price forecasts for Brent and WTI crude oil per barrel in 2025 by about 8% to $77.59 and $73.13 respectively. The EIA said that the lower crude oil price reflects slower global crude oil demand growth in 2025.
Li Yan, a crude oil analyst at Longzhong Information, told the Global Times that in terms of news, the possibility of oil supply disruptions caused by the situation between Israel and Iran has slowed. At the same time, Hezbollah in Lebanon and Israel may cease fire. Coupled with the US Energy Information Administration lowering its oil demand growth forecast for next year and lowering its oil price forecast, international oil prices took profits after five consecutive trading days of gains, causing European and American crude oil futures to fall by more than 4.6%.
Li Yan said, "The situation in the Middle East has pushed up international oil prices to continuously rise during the National Day holiday. The oil market has been waiting for Israel's response to last week's Iranian missile attacks. However, analysts believe that Israel may strike Iranian military facilities rather than oil facilities, which has temporarily relaxed the tense market."
According to the latest data from the American Petroleum Institute (API), as of the week ending October 4, US crude oil inventories increased by 10.9 million barrels. Li Yan believes that the increase in US oil inventories is very large and exceeds market expectations. The insufficient demand caused by the weak global economy will be a drag on international oil prices. He said, "It is the combination of multiple factors that has led to a sharp drop in continuously rising international oil prices on the 8th."
Oil prices are unlikely to soar, but volatility will increase.
Li Yan said that the key factor for future oil price trends is still changes in the situation in the Middle East. However, he believes that the possibility of the situation in the Middle East getting out of control is not high. Therefore, there is no basis for a sharp spike in international oil prices.
In addition, the suppressing effect of the global economic environment on oil prices still exists. Li Yan believes that the International Monetary Fund (IMF) has lowered this year's global economic growth rate to 3.2%, lower than last year. Until the fourth quarter, international oil prices will be constrained by this. Unless there are events like the epidemic or the Russia-Ukraine conflict, international oil prices will not rise significantly. $80 may be the recent peak price for Brent crude oil; and downward, there is no room for a sharp drop. However, Li Yan warns that the volatility of international oil prices will increase.
According to CNBC, Daniel, vice chairman of S&P Global and an energy expert, said on Tuesday that as the tension in the Middle East continues to heat up, the global economy is entering an unprecedented "dangerous period." The report also speculates that in the worst-case scenario, Iran takes action and blocks the Strait of Hormuz. Hildebrandt, chief commodity analyst at Sweden's SEB Bank, said, "If the situation worsens and the Strait of Hormuz is closed for a month or longer, then Brent crude oil prices could soar to $350 per barrel and the world economy will be in trouble. Even if oil prices will fall back below $200 per barrel again after a period of time." But he added, "However, judging from the current oil prices, the market does not seem to think that the possibility of such a situation is very high."