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.

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According to a report from Bloomberg, US officials have slowed down the issuance of licenses for chip manufacturers like NVIDIA and AMD to export large quantities of AI accelerators to the Middle East. Meanwhile, officials are conducting a national security assessment of AI developments in the region.

As per Bloomberg’s report citing sources, it is still unclear how long the assessment will take and what exactly constitutes a large-scale export. They said that officials are particularly concerned about large-scale sales because countries like the UAE and Saudi Arabia are looking to import significant quantities of chips for AI data centers.

AI accelerators can help data centers process the massive amounts of information required for developing AI chatbots and other tools. They have become essential equipment for companies and governments seeking to build AI infrastructure.

Reportedly, sources have revealed that slowing down exports is intended to give Washington time to formulate a comprehensive strategy on how advanced chips should be deployed overseas. Some of these sources mentioned that this includes negotiating who will manage and secure the facilities used to train AI models.

The US Department of Commerce stated in a statement that “protecting national security” is the top priority.

“With regards to the most cutting edge technologies, we conduct extensive due diligence through an interagency process, thoroughly reviewing license applications from applicants who intend to ship these advanced technologies around the world,” a representative for the department said. “As always, we remain committed to working with our partners in the Middle East and around the world to safeguard our technological ecosystem.”

Addressing national security concerns, earlier this month, the U.S. government has reportedly revoked the licenses of Intel and Qualcomm to supply semiconductor chips used in laptops and handsets to Huawei. According to Reuters citing sources, some companies received notices on May 7th, and the revocation of the licenses took immediate effect.

Read more

• [News] U.S. Imposes Further Sanctions, Revoking Intel and Qualcomm’s License to Supply Chips to Huawei
• [News] US Considers Sanctioning Huawei-Linked Chinese Chip Network, Huawei-Related Enterprises Blacklisted

(Photo credit: NVIDIA)