On Thursday (October 24th), it was reported that the United States and Israel will attempt to restart ceasefire negotiations in the Gaza region. As a result, international crude oil futures prices fell amid volatility, with West Texas Intermediate (WTI) futures briefly dropping below the $70 per barrel mark. WTI crude oil futures for December delivery on the New York Mercantile Exchange fell by 58 cents to close at $70.19 per barrel, a decline of 0.82%. Brent crude oil futures for December delivery on the European Intercontinental Exchange fell by 58 cents to $74.38 per barrel, a drop of 0.77%.
Earlier, the market was concerned that conflict in the Middle East might affect global oil supply, causing the prices of both crude oils to rise by more than $1 per barrel. However, as U.S.-Israel negotiations progressed, the geopolitical risk premium gradually narrowed, and oil prices retreated. Analysts pointed out that the risk of supply disruptions and oil price volatility due to the Middle Eastern situation has become a market norm, with oil prices fluctuating daily as a result.
Reviewing this month's market trends, since the beginning of October, the confrontation between Iran and Israel has been a key factor affecting the oil market. Iran's missile launch at Israel on October 1st sparked concerns of global oil supply disruptions, with Brent crude prices rising by about 8% that week. However, with Israel's statement it would not attack Iran's energy infrastructure, Brent crude prices fell by 8% in the following week, alleviating supply concerns.
According to data from the U.S. Energy Information Administration, Iran, as a member of the Organization of Petroleum Exporting Countries (OPEC), had an average daily oil production of about 4 million barrels in 2023. Looking ahead to 2024, analysts predict Iran's oil exports will increase to 1.5 million barrels per day, slightly higher than the 1.4 million barrels per day in 2023. This growth reflects Iran's increasing influence in the global oil market. Iran has been supporting several armed organizations fighting against Israel, such as Hezbollah in Lebanon, Hamas in Gaza, and the Houthi armed forces in Yemen, further heightening market focus on the Middle Eastern situation.
Meanwhile, the upcoming U.S. presidential election also has a significant impact on the energy market. U.S. Middle Eastern policy and oil strategy may change under a new government. Although betting markets show former President Trump leading in the race, various polls indicate the election is still unpredictable. Trump has proposed expanding the U.S. domestic oil supply, which could potentially lower international oil prices in the future. However, the slowdown in U.S. economic growth, particularly with continuous sluggish business activity in Europe and the U.K., has exacerbated concerns about declining global demand.
Economic data from the Eurozone and the U.K. show business activity is either stagnant or contracting, with reduced business confidence in the future. Meanwhile, U.S. employment market data has also drawn attention, as the number of initial unemployment claims in the U.S. unexpectedly decreased last week, but long-term unemployed individuals find it increasingly difficult to find new jobs, highlighting challenges in economic recovery. Against the backdrop of weak global demand, oil market volatility is likely to continue.
