The global oil market has recently been heavily influenced by political and economic factors, with a notable drop in prices, especially in crude oil. The price of Brent oil reached $93.55 per barrel and then, with adjusted expectations, approached $100 again. These fluctuations indicate the geopolitical impacts on the oil market.
Impact of Geopolitical Factors on Oil Prices
Analysts from Saxo Bank, HSBC, and Macquarie emphasize that a significant portion of the recent decline in oil prices is due to a risk-off sentiment regarding geopolitical issues. Meanwhile, a sustainable and complete balance between supply and demand in the global market has yet to occur. In particular, the recent agreement between the Iraqi government and the United States regarding the transfer of the country's crude oil to global markets could impact supply balance.
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State of the Product Market and Its Impact on Prices
One key point in this analysis is the differing behavior of the crude oil market and the petroleum products market. While crude oil prices have decreased, the prices of products, especially diesel and jet fuel, may remain at higher levels. This is due to the lack of a return to normal conditions for refining capacity and international trade in products. As a result, the costs of air, sea, and land transportation fuel remain high.
Decline in Global Reserves and Market Vulnerability
HSBC analysts have pointed to a decline in global reserves, believing that this has limited the market's capacity to absorb new supply disruptions. Estimates suggest that if a disruption of 2 to 3 million barrels per day occurs, the market may face a supply shortage again, putting upward pressure on prices. Additionally, attacks on oil tankers in October have reached the highest recorded level during the war.
Imbalance Between Crude Oil and Product Markets
Macquarie strategists attribute the recent decline in oil prices to the reversal of some of the accumulated risk premium from September and October. The U.S. midterm elections and changes in the power of Democrats in Congress alone cannot determine foreign policy. However, the oil supply flow in the region has returned better than previous forecasts, and improvements have occurred sooner than some analysts expected.
Ultimately, analysts believe that even a temporary disruption in production or transportation could lead to significant price volatility in the global oil market. Therefore, new oil transfer capacities expected to come online at the beginning of 2027 could help alleviate supply constraints, but their effectiveness depends on the timing of operation and access to export routes.
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