Oil Prices Plunge 4% on Weaker Demand Outlook and Easing Middle East Tensions

Oil prices tumbled more than 4% on Tuesday, reaching their lowest levels in nearly two weeks due to a weaker global demand outlook and a report suggesting that Israel may refrain from striking Iranian oil infrastructure. This development eased concerns over potential supply disruptions in the Middle East, which had previously driven oil prices higher.

Price Movements and Israel’s Stance

• Brent crude futures dropped $3.51 (4.5%) to $73.95 a barrel, the lowest since October 2.
• West Texas Intermediate (WTI) futures fell $3.48 (4.7%) to $70.35 a barrel.

These declines followed a 2% drop on Monday, with oil benchmarks now down about $5 for the week, nearly erasing gains spurred by fears that Israel might retaliate against Iran’s oil facilities after an October 1 missile attack. However, according to a report by the Washington Post, Israeli Prime Minister Benjamin Netanyahu informed the U.S. that Israel is focused on striking Iranian military targets rather than its nuclear or oil infrastructure.

Global Demand Concerns and OPEC Adjustments Adding to the downward pressure on oil prices were revisions to global demand forecasts by both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA). Both organizations downgraded their outlook for 2024, with China’s slower-than-expected economic growth driving much of the revision.

OPEC remains more optimistic than the IEA regarding global demand growth, but analysts such as John Evans from oil broker PVM noted that OPEC’s “run of lower adjustments” reflects a more realistic acknowledgment of the challenges facing the market.

China’s Impact China’s customs data showed that oil imports in September were lower than the same period last year. Additionally, a Reuters poll indicated that China’s economic growth in 2024 is likely to fall short of Beijing’s official targets, further dampening demand expectations from the world’s largest oil importer.

The combination of easing geopolitical fears and softer demand forecasts is contributing to the current slump in oil prices, as traders reassess the near-term outlook for the global energy market.