Oil prices surged almost 10% in the two weeks following Iran’s ballistic missile attack on Israel on October 1st, settling at $79.04 per barrel at last week’s close and trading above $80 per barrel—levels not seen since August.

The primary driver behind this surge has been the heightened risk of escalation in the Middle East, compounded by short-term supply disruptions and a rush in U.S. demand triggered by Hurricane Milton in Florida. West Texas Intermediate (WTI) followed suit, closing at $75.56 per barrel last Friday.

However, oil prices retraced on Monday, with Brent closing at $77.46 per barrel and opening at $75.25 per barrel on Tuesday. This decline followed China’s highly anticipated Finance Ministry briefing on Saturday, which failed to introduce new measures to boost demand growth in the country.

Currently, two opposing forces are shaping near-term oil prices: rising geopolitical risks and a bearish demand outlook, combined with the possibility of increased OPEC production. The ongoing tensions between Israel and Iran raise concerns about a broader regional conflict that could threaten global oil supplies. At the same time, China’s sluggish economic performance and OPEC’s substantial spare capacity could soften the impact of production disruptions.

The prevailing bearish sentiment has negatively impacted the earnings of major oil companies for last quarter. Bloomberg announced last Friday that its third-quarter profit would be reduced by up to $600 million due to weak refining margins and lower oil product prices.

This marks a significant drop in profitability for global refiners, reversing the strong returns seen post-pandemic. Other oil giants, including Shell and ExxonMobil, have also reported similar declines in refining margins and profits. Oil prices fell by 17% in the third quarter—the largest quarterly drop in a year—while gasoline prices dropped nearly 11% during the same period, despite the usual seasonal demand (as reflected by the N.W.E. Gasoline Swap historical chart below, the main European gasoline benchmark). (Source: BBG)

TraditionData’s Oil pricing data products provide valuable insights into oil market movements, particularly in times of high volatility. Our extensive coverage of global oil benchmarks supports clients navigating complex market dynamics, driven by geopolitical risks, supply disruptions, and shifting demand patterns.

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