Crude oil prices have sharply declined, marking the largest single-day drop in nearly two years as Israel’s recent strikes on Iran avoided impacting any oil extraction facilities, thereby reducing the political risk premium associated with the Middle East.

Last Saturday, Israel launched airstrikes on Iranian military targets in retaliation for nearly 200 missiles fired by Iran three weeks ago. However, at the request of U.S. President Joe Biden, Saturday’s strikes spared any OPEC+ member oil extraction facilities from damage.

According to an early October report by the U.S. Energy Information Administration (EIA), the recent decline in oil prices led to a downward revision in EIA’s 2025 daily oil supply growth forecast to about 2 million barrels per day (previously 2.4 million). Nevertheless, with OPEC+ extending production increases through late 2024 and non-OPEC nations also increasing output into 2025, global daily oil supply for 2024 and 2025 is still expected to reach 102.5 million and 104.5 million barrels, respectively.

On the demand side, with slower Chinese oil imports and a global manufacturing downturn, the EIA adjusted down its demand forecasts for both China and OECD countries. Global daily oil demand is now expected to reach 103.1 million barrels in 2024 and 104.3 million barrels in 2025.

Additionally, projected net daily demand growth has been revised downward for Q1 2024 and Q2 2025, to approximately 600,000 and 500,000 barrels, respectively, down from earlier forecasts of 1.2 million and 900,000 barrels.

Overall, with Middle Eastern political risk premium decreasing, crude oil prices are now trending towards a fundamentally weaker outlook for the mid-to-long term. As of October 28, WTI crude futures dropped to $67.38 per barrel, while Brent crude also fell to $71.42 per barrel.

Read more at Datatrack