On Monday, international oil prices plummeted by 6%.
The significant drop was caused by Israel’s attack on Iran on Saturday, which was confined to military facilities like Iranian air defense bases, avoiding the feared strikes on oil infrastructure.
The international oil benchmark Brent crude and the U.S. benchmark West Texas Intermediate (WTI) both fell by 6.1% compared to the previous weekend. Brent crude dropped $4.63, closing at $71.42 per barrel, while WTI fell $4.40 to end at $67.38 per barrel.
Both benchmarks reached their lowest levels in about two months since early September. This marked the largest drop since July 2022, when prices fell nearly 8%.
Tensions subsided as Israel refrained from attacking Iranian oil facilities on October 26, and Iranian Supreme Leader Ayatollah Ali Khamenei suggested a limited response to Israel on the 27th. This movement alleviated concerns over retaliatory attacks and reduced worries about oil supply disruptions and price hikes.
The Financial Times (FT) cited oil market analysts, stating that the day’s price drop indicates that oil prices are once again greatly influenced by macroeconomic factors, particularly the anticipated slowdown in Chinese demand.
International oil prices had been declining due to forecasts of an economic slowdown in China, the world’s largest oil importer, before spiking due to fears of an escalating conflict in the Middle East.
Bill Farren-Price, a senior researcher at the Oxford Institute for Energy Studies, noted that the limited attacks between Iran and Israel contributed to the drop in oil prices.
He remarked that while the days’ drop does not rule out the possibility of future price spikes, current macroeconomic factors keep oil prices at manageable levels.
In light of slowing demand in China, reports indicate that Saudi Arabia, the world’s largest oil producer, has abandoned its unofficial target price of $100 per barrel and plans to increase production starting December 1. This increase in supply is expected to contribute to declining oil prices.
Goldman Sachs recently projected that the oil market’s focus will shift from geopolitical tensions in the Middle East to concerns about oversupply next year.
They had previously anticipated that the market would stabilize quickly, even if the Iranian oil supply decreased due to rising tensions.
According to Goldman Sachs, in previous supply disruptions, Saudi Arabia and the United Arab Emirates (UAE) promptly increased production, covering 80% of the shortfall within two quarters.
