Oil prices dropped significantly on Tuesday, falling as much as $3 to reach near two-week lows during Asian trading. This decline was driven by a weakened demand outlook and reports indicating that Israel would refrain from targeting Iranian oil installations, alleviating supply disruption fears.
Current Market Prices
As of 0640 GMT, Brent crude futures fell by $2.81, or 3.6%, settling at $74.65 per barrel. Earlier in the session, prices had dipped to $74.26, marking the lowest level since October 2. Meanwhile, U.S. West Texas Intermediate (WTI) futures also dropped, losing $2.72 or 3.7% to $71.11 per barrel, with a low of $70.75 reached, the weakest since October 3.
Both oil benchmarks had closed approximately 2% lower on Monday. So far this week, prices have declined by almost $5, nearly erasing gains made during the previous seven sessions, driven by concerns over supply risks following Israel’s plans to retaliate against a missile attack from Iran.
Geopolitical Influences
Israeli Prime Minister Benjamin Netanyahu informed the U.S. that Israel would focus its military actions on Iranian military targets rather than nuclear or oil facilities, according to a report by the Washington Post late on Monday.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, commented, “Weakening demand has led traders to withdraw the ‘war premium’ from prices. However, geopolitical factors continue to support oil at this level. Without these factors, prices could have fallen even more, possibly dropping below the $70 per barrel mark amid the current weakening demand narrative.”
OPEC’s Revised Forecasts
The Organization of the Petroleum Exporting Countries (OPEC) recently revised its forecast for global oil demand growth for 2024. The organization attributed much of this downgrade to China, where demand is now expected to increase by 580,000 barrels per day (bpd), down from the previous estimate of 650,000 bpd.
OPEC also reduced its global oil demand growth projection for next year from 1.74 million bpd to 1.64 million bpd. Data from China’s customs indicated that oil imports for September decreased compared to the previous year, as refineries scaled back purchases due to weak domestic fuel demand and narrowing export margins.
Independent market analyst Tina Teng noted that although the demand outlook remains weak due to record-high U.S. production and soft demand from China, “oil has retreated from the surge prompted by Middle East tensions, suggesting that the market reaction may have been overdone.”
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