【MACRO Alert】Outlook for the global oil market - the dual impact of geopolitics and speculative tr

In the global oil market, analysts hold different views on the future direction of oil prices. Although conflicts and tensions in the Middle East have raised market concerns about oil supply disruptions, many experts believe that the current situation of global oil oversupply will lead to lower oil prices.

Tom Kloza, global director of energy analysis at Oil Price Information Service, predicts that 2025 will be a turbulent year for the oil market, with crude prices likely to fall sharply. He warned traders not to bet on a disruption in Middle Eastern oil supply because the world is oversupplied and price falls are inevitable. The United States produced more oil in 2023 than any other country in history, according to the U.S. Energy Information Administration, and the production boom is expected to continue until 2026. Kloza also noted that OPEC+, led by Saudi Arabia, is also expected to add more crude oil production by the end of the year.

However, ING analyst Warren Patterson believes that the future direction of oil prices will depend on Israel's response to Iran. If Israel attacks Iranian oil assets, it could push oil prices to $90 a barrel. Nevertheless, Kloza dismissed concerns that the Middle East conflict could lead to supply disruptions, believing that the probability of this actually happening is very low.

Globally, volatility in the oil market is also driven by speculators. The so-called "geopolitical risk premium" makes a barrel of oil $5 higher, while the world consumes only 100 million barrels of oil every 24 hours, far less than the 6 billion barrels of "virtual" oil traded every day. This market controlled by speculators has led to wild swings in oil prices. The conflict between Israel and Iran and the launch of China's economic stimulus plan drove a sharp rise in Brent crude oil prices, but then a sharp fall.

Tom Skingsley of JPMorgan Chase pointed out that the initial oil price rebound was almost entirely caused by risk premium, but investor positioning was also an important factor. In the past few months, algorithmic selling has reached a historical extreme, and the net short position of speculative trend-following hedge funds (CTAs) has never been so large. These funds focus more on technical factors than macroeconomic or geopolitical factors.

In China, the National Development and Reform Commission announced on October 10 that according to the current mechanism for the formation of refined oil prices, domestic gasoline and diesel prices will increase by 140 yuan and 135 yuan per ton respectively. This adjustment has led to increased costs for private car owners and logistics companies. Analyst Xu Wenwen said that ordinary private cars will spend about 5.5 yuan more to fill up a tank of gas, while large logistics and transportation vehicles will spend about 4.4 yuan more for every 100 kilometers of fuel traveled.

In terms of international crude oil prices, the price trend fluctuated during this round of pricing cycle, but there was still a certain increase overall. In the early stage, poor economic data in Europe and the United States put pressure on oil prices, but then concerns about geopolitical conflicts in the Middle East boosted oil prices. Although "OPEC+" stated that it would continue to promote its oil production increase plan, the market has high expectations for the Fed's interest rate cut, and it is expected that the next round of retail price limits for refined oil products will be raised. Analysts believe that the trend of crude oil prices will depend on the geopolitical situation in the Middle East. If the situation escalates, oil prices will rise, but the market also expects that there will be no systemic oil supply disruptions.

Overall, although the tensions in the Middle East have had a certain impact on the oil market, the current situation of global oil oversupply and active trading by speculators have put oil prices under downward pressure. Investors and analysts are closely watching the dynamics in the Middle East, as well as changes in the global economy and monetary policy, to predict the future trend of oil prices.