Breaking News: Oil Prices Plummet 6% as Geopolitical Tensions Rise
The price of oil took a nosedive on Monday, dropping by 6% to $67 a barrel for WTI and $71 for Brent. This sudden decline comes on the heels of Israel’s attack on Iran’s oil capacity, sparking fear and uncertainty in the market. The aftermath of the attack and the retaliatory rhetoric from both countries have led to speculation that the situation may escalate further. As a result, the geopolitical risk premium has plummeted, bringing oil prices back to levels seen before the recent tensions in the Middle East.
In September, oil prices were already nearing the lower end of a 40-month range, reflecting the global economic slowdown. Despite efforts such as Chinese stimulus packages and G10 monetary easing measures, the market remains sluggish. The US, however, continues to produce oil at record levels, with last week marking the second consecutive week of record supply at 13.5 million bpd.
While drilling activity has decreased and oil inventories are relatively low, the rise of alternative energy sources poses a threat to the oil market. The recent drop in oil prices has shifted the balance in favor of bears, with the price now testing horizontal support levels. A close below $65 in October could signal a major downturn, potentially leading to a further decline towards the $50 mark.
Analysts are warning of a possible collapse in oil prices, with historical trends suggesting that the market may not stabilize until reaching the $30-35 range. Investors and consumers should brace themselves for potential price fluctuations in the coming weeks.
The FxPro Analyst Team