Oil prices dropped by approximately 1% in a volatile trading session on Thursday, reflecting worries that slow economic growth in Europe may decrease energy demand. This decline comes as uncertainty regarding the ongoing conflict in the Middle East looms over traders ahead of the US presidential election.
By 11:48 am EDT (1548 GMT), Brent futures had fallen 54 cents, or 0.7%, to $74.42 a barrel, while US West Texas Intermediate (WTI) crude slipped 59 cents, or 0.8%, to $70.18. Earlier in the day, both benchmarks had been trading up over $1 a barrel.
“(The) energy complex continues to zig and zag as Middle East risk premium expands and contracts almost daily,” analysts at energy advisory firm Ritterbusch and Associates noted.
Following Iran’s missile strikes on Israel on October 1, Brent crude prices surged by 8% during the week ending October 4 due to fears that Israel might retaliate against Iran’s oil infrastructure. However, prices fell by 8% in the week ending October 18 after reports indicated Israel would not target energy infrastructure, easing concerns about supply disruptions.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced around 4.0 million barrels per day (bpd) of oil in 2023, according to data from the US Energy Information Administration (EIA). Analysts and US government reports suggested that Iran was set to export about 1.5 million bpd in 2024, an increase from an estimated 1.4 million bpd in 2023.
As the US presidential election approaches on November 5, which could impact US Middle East and oil policy, President Joe Biden’s administration is actively seeking peace between Israel and Hezbollah and Hamas.
“(Former President Donald) Trump is leading over (Vice President Kamala) Harris based on current data from betting markets, and Trump has proposed making the US a major oil supplier,” said OANDA senior market analyst Kelvin Wong, noting that such a shift could depress prices. While betting markets favor Trump, other polls indicate the election outcome is too close to call.
Demand Concerns
In Europe, business activity in the Eurozone has stalled again this month, remaining in contraction as demand from both domestic and international markets has declined, despite firms barely increasing their prices, according to a Thursday survey.
In the UK, confidence among businesses has dropped significantly, as revealed by two surveys released on Thursday, just six days before finance minister Rachel Reeves presents the new government’s first budget, aiming to navigate the challenges of raising taxes while promoting growth.
In the US, new applications for unemployment aid unexpectedly fell last week; however, the number of people collecting benefits in mid-October reached its highest level in nearly three years, indicating that it is becoming increasingly difficult for those losing jobs to secure new employment.
