On Monday, international oil prices fell sharply. As of the close, the price of New York light crude oil futures closed at $67.38 per barrel, a decrease of 6.13%; London Brent crude oil closed at $71.42 per barrel, a decrease of 6.09%. On October 29th, international oil prices continued to fluctuate and consolidate. As of around 12:15 pm, US and Brent crude oil prices rose by 0.03% and 0.01% respectively.
Industry insiders believe that the international oil price has plummeted by over 6%, mainly due to geopolitical factors, global economic slowdown, and oversupply. Especially with the easing of tensions in the Middle East, the risk of short-term supply shortages has been reduced, forcing oil prices to return to a medium-term pessimistic fundamental outlook.
Catherine Brooks, an analyst at European brokerage firm XTB Group, stated in a report that the sharp drop in international oil prices on Monday indicates that the conflict premium is beginning to fade, and the market focus is shifting towards oversupply in 2025. According to market observers, the medium-term outlook for oil now looks pessimistic due to expectations of weak global demand and the prospect of oversupply next year as OPEC+prepares to increase production.
Tamas Varga, Senior Market Analyst at PVM Oil Associates, a crude oil broker, believes that the trend of oil prices is a process of geopolitical premiums "squeezing water". Previously, there were concerns that Israel's attack on Iran's oil industry stronghold of Kharg Island in the northeast of the Persian Gulf would cause a disruption to global energy artery transportation in the Strait of Hormuz.
Citibank stated in a report that, considering the recent decrease in risk premium, it has lowered its Brent crude oil target price for the next three months from $74 per barrel to $70 per barrel.
Analysts from Zhuochuang Information stated that the market's concerns about the worsening geopolitical situation affecting oil supply have sharply decreased. Considering the weakened support of the geopolitical situation for the oil market and the lack of significant positive macro and supply-demand fundamentals, the oil market is under pressure and there is a significant downside risk.
The global economic slowdown and lowered demand expectations have also had a negative impact on international oil prices. The International Monetary Fund (IMF) has lowered its global economic growth forecast, expecting a global economic growth rate of 3.2% in 2024 and 2025. The slowdown in global economic growth means a decrease in demand for crude oil, and investors' expectations of weakened future demand directly lead to a sharp drop in oil prices.
From a fundamental perspective, against the backdrop of OPEC, the International Energy Agency, and other institutions continuously lowering their forecasts for the growth rate of crude oil demand in the next two years, the fragile demand outlook and expectations of oversupply in the oil market have become the main obstacles to rising oil prices.
From the supply side, the OPEC+production increase plan that will begin in December and the high oil production in the United States are undoubtedly the main supply disadvantages in the crude oil market. The US Energy Information Administration (EIA) recently announced that domestic crude oil production in the United States has once again hit a historical high of 13.5 million barrels per day this month.
From the demand side, the Goldman Sachs report points out that with China's recent implementation of a series of economic stimulus measures, the growth prospects of the economy are expected to improve, which may have a positive impact on crude oil demand, expected to increase by about 100000 barrels per day. And it is expected that by the end of 2025, these measures may cause oil prices to rise by $1 to $2 per barrel.
A senior industry insider believes that after the risk of geopolitical tensions cools down, market attention will focus on the US presidential election and the subsequent interest rate policy of the Federal Reserve... The weak outlook of the current crude oil market fundamentals puts pressure on oil prices, but uncertainties in both supply and demand and geopolitical situations still exist, which may support the short-term high volatility of oil prices. It is expected that oil price fluctuations will continue for a period of time.