On Monday (October 21), crude oil futures prices rebounded, partially recovering last week's losses. The main drivers include the reintroduction of economic stimulus policies by a major Asian country, and market concerns over supply disruption risks due to ongoing tensions in the Middle East. The price of West Texas Intermediate (WTI) crude for November delivery on the New York Mercantile Exchange rose by $1.34, nearly a 2% increase, closing at $70.56 per barrel. Brent crude for December delivery also rose, with a gain of 1.7%, closing at $74.29 per barrel.
The increase in the oil market was boosted by an Asian country's cut in its benchmark lending rate, which strengthened confidence in the oil demand outlook of the world's second-largest economy. Saudi Aramco CEO Amin Nasser remains optimistic about the country's demand recovery outlook, believing that future demand will maintain strong growth.
Last week, oil prices plummeted due to a decrease in Middle Eastern tension risk premium, with Brent crude and WTI crude recording drops of over 7% and 8% respectively, marking the largest weekly decline since the beginning of September. However, at the start of this week, the oil market saw a rebound as traders began reassessing the potential impact of Middle Eastern tensions on oil supply. U.S. Secretary of State Antony Blinken returned to the Middle East, attempting to broker a ceasefire between Israel and Palestine and consulting with Lebanese officials on the risk of conflict escalation.
Market analysts point out that the current oil market is seeking a new balance between unclear global demand prospects and Middle Eastern geopolitical tensions. Despite the risks of an economic slowdown globally, particularly with U.S. economic data not showing strong increases in oil demand, ongoing instability in the Middle East could disrupt supply chains, driving a phased rebound in oil prices.
Meanwhile, Minneapolis Fed President Neel Kashkari reiterated in his latest speech that U.S. interest rates may moderately decline in the coming quarters, potentially supporting global energy demand. He emphasized that if the labor market deteriorates, the rate of interest cuts could accelerate, further boosting economic activity and increasing oil demand.
Additionally, the latest data from the U.S. Energy Information Administration shows that oil field production has reached an all-time high, providing some supply assurance for the market. Meanwhile, attention to changes in U.S. crude oil inventories continues to rise, with preliminary surveys indicating a slight increase in crude inventories last week, while gasoline and distillate inventories are expected to decrease.
Future fluctuations in the oil market will continue to be dominated by the situation in the Middle East, with investors needing to remain vigilant about geopolitical risks and the uncertainty of the global economic outlook.
