Jamie Spencer
U.S. crude oil prices are on track for a third consecutive monthly decline in September, driven by increasing supplies from OPEC+ and a drop in demand from China, the world’s largest importer of crude oil. Despite ongoing geopolitical tensions in the Middle East, oil prices have continued to fall, with the U.S. benchmark West Texas Intermediate (WTI) down over 7% this month and global benchmark Brent crude dropping around 9%.
The downward pressure on prices comes as OPEC+ prepares to boost production in December, which could lead to further market loosening next year. “Oil markets are experiencing a panic attack,” said Amarpreet Singh, energy analyst at Barclays, in a note to clients on Friday. However, Singh believes that the concerns driving this sell-off are “likely overdone.” Barclays forecasts Brent crude to average $85 per barrel in 2025, indicating that the current slump may not last long.
Key Energy Price Movements on Monday
- West Texas Intermediate (November contract): $68.23 per barrel, up by 5 cents or 0.07%. Year to date, U.S. crude prices have dropped by nearly 5%.
- Brent (November contract): $71.69 per barrel, down 29 cents or 0.4%. Year to date, Brent crude has fallen by almost 7%.
- RBOB Gasoline (October contract): $1.954 per gallon, up 0.05%. Gasoline prices have pulled back by about 7% since the start of the year.
- Natural Gas (November contract): $2.896 per thousand cubic feet, down 0.21%. Despite the oil price slump, natural gas prices have gained around 16% year to date.
Oil Markets Unresponsive to Geopolitical Risks
Despite escalating conflict in the Middle East, including an Israeli airstrike that killed Hezbollah leader Hassan Nasrallah in Beirut, oil prices have remained relatively unaffected by geopolitical risks. Analysts attribute this unresponsiveness to market expectations of higher oil supply from countries like Libya and Saudi Arabia, which are offsetting the potential impact of Middle Eastern tensions.
Daan Struyven, head oil analyst at Goldman Sachs, commented in a Sunday note to clients, “This price action reflects that the geopolitical risk premium remains limited, given market expectations of potentially higher oil supply.” The market appears more focused on supply factors, with Libya and Saudi Arabia playing key roles in balancing the global oil supply amid lower demand from China.
Looking Ahead: Potential for Stabilization
With OPEC+ set to raise production in December and further market loosening expected next year, oil prices may continue to face pressure in the short term. However, analysts like Singh at Barclays and Struyven at Goldman Sachs believe that the long-term outlook could be more stable, especially as geopolitical risks in the Middle East become more prominent or as demand from major importers like China rebounds.
While prices remain under pressure for now, the forecasted average of $85 per barrel for Brent crude in 2025 suggests that the oil market may recover from its current dip, especially if demand stabilizes and supply tightens in the future.
