Crude Oil Market Analysis: Weak Demand and Ease of Middle East Supply Concerns Lead Oil Prices to Hit October Lows

1. crude oil prices fall background

recently, crude oil prices fell significantly, hitting the lowest level in October, as global demand forecasts weakened and concerns about supply disruptions in the Middle East subsided. This trend is mainly affected by multiple factors such as changes in the geopolitical situation, sluggish demand in major economies, and unexpected inventory data.

2. oil price specific decline and trend

benchmark Brent crude futures for near-month delivery on the Intercontinental Exchange (ICE) plunged 7.59 per cent to $73.06 a barrel last week, one of the biggest weekly declines in recent years. At the same time, West Texas Intermediate crude oil futures for near-month delivery on the New York Mercantile Exchange also fell steadily from $75.56 a barrel to $69.22 a barrel, a 8.39 per cent decline. These data show that oil prices are under strong short-term pressure.

3. Demand Concerns and Supply Changes

Rahul Kalantri, vice president of Mehta Equities Ltd, pointed to concerns about reduced Chinese demand as one of the main reasons for the sharp drop in oil prices. The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC +) also lowered their global demand outlook for 2024 and 2025. In addition, Israel's avoidance of action against Iranian oil facilities has eased the geopolitical risk premium, further weighing on oil prices. However, an unexpected drop in US crude oil inventories and better-than-expected Chinese economic data provided some support for oil prices at lower levels.

4. Demand Declining Trend and Supply Adjustment

the International Energy Agency (IEA) predicts that world oil demand growth will slow significantly in 2024 and 2025, mainly due to slower demand growth in China. At the same time, due to the political turmoil in Libya and the maintenance of oil fields in Kazakhstan and Norway, global crude oil supply declined in September. These changes have led to a significant decline in refining margins, further affecting global crude operating rates.

5. OPEC + and US Energy Market Trends

OPEC + cut its forecast for world oil supply and demand growth in its October oil market report. Meanwhile, data from the US Energy Information Administration (EIA) showed that despite an unexpected drop in US crude oil inventories, crude oil production hit a record high, adding to concerns about increased supply. In addition, the EIA also lowered its crude oil production forecasts for 2024 and 2025.

6. China's economy and monetary policy impact

china's economy grew 4.6 percent year-on-year in the third quarter of 2024, below market expectations and showing pressure on growth. The People's Bank of China injected liquidity through reverse repurchase operations, but net cash withdrawals remained high. The People's Bank of China also cut key interest rates to support economic growth. These monetary policy adjustments may have some impact on crude oil demand, but it is difficult to change the weak demand situation in the short term.

7. summary and prospect

the crude oil market has been affected by multiple unfavorable factors in the near future, leading to a sharp drop in oil prices. While some better-than-expected economic data provided some support for oil prices, concerns about overall weak demand and increased supply still dominated the market. In the future, with the changes of geopolitical situation, the adjustment of economic policies of major economies and the further evolution of supply and demand relationship, the crude oil market will continue to face fluctuations and challenges.