Last Friday, oil prices plummeted, with Brent crude futures falling by 2.68%, closing at $74.43 per barrel, and US crude futures dropping by 2.87%, closing at $70.40. This decline means oil prices fell by over $2 during this week's trading, and last week's weekly trend also showed a decline, with Brent crude futures down 0.4% and US crude futures down 0.5%.
Investors are facing pressures from multiple fronts, including the dissipation of Middle Eastern risk premiums and the uncertainty of a potential peace agreement in Ukraine. Market sentiment has shifted, making investors more cautious. John Kilduff, partner at Again Capital, stated: "The market has developed a risk-averse tone." He noted that with the ceasefire in Gaza holding, the overall situation in the Middle East has remained relatively calm, which hasn't supported oil prices.
Meanwhile, the US Energy Information Administration (EIA) stated last Thursday that US crude inventories increased due to seasonal refinery maintenance leading to a decline in processing volumes. This factor has added uncertainty to the market, with investors continuing to monitor the impact of inventory data on the market. Energy services company Baker Hughes reported that US energy companies continue to add active oil and gas rigs, reaching the highest level since June.
Nonetheless, disruptions in oil supply have somewhat limited the extent of the price decline. Recently, Russia indicated that due to Ukrainian drone attacks on the main conduit for Kazakh oil exports—the Caspian Pipeline Consortium (CPC)—the flow through this pipeline has decreased by 30%-40%. However, the Russian Interfax news agency, citing Tengizchevroil, reported that oil deliveries from the Tengiz field in Kazakhstan via the Caspian pipeline remain unaffected. Industry sources also noted that despite the pipeline disruption, Kazakhstan's oil production has reached a historical high, though it's unclear how this was achieved.
Furthermore, tensions have arisen between Ukraine and the US, with Ukrainian President Zelensky criticizing the US and Russia for holding peace talks on the Ukraine issue without Ukraine's involvement. Zelensky pointed out that this approach leaves Ukraine feeling excluded and exacerbates uncertainty in the situation.
On the other hand, Iraq's deputy oil minister, Basem Mohammed, stated that Iraq will export oil through the Iraq-Turkey pipeline, with an expected daily export of 185,000 barrels eventually increasing to 400,000 barrels per day. He noted that while there is no specific timeline, Iraq has completed all procedures for resuming pipeline transport. This move may help alleviate supply issues caused by pipeline disruptions over the past two years.
However, restoring pipeline transport may place Iraq in a dilemma, as it is obliged to cut crude production under the OPEC+ agreement. Additionally, US President Trump has urged OPEC+ to take action to lower oil prices, further increasing market uncertainty.
Overall, the decline in oil prices has been impacted by multiple factors, including a calm Middle East situation, uncertainty in Ukraine, and oil supply disruptions. Investors need to closely monitor future supply changes and geopolitical developments.
