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Oil prices fall as geopolitical risk premium declines

Oil Declines for Second Consecutive Day

Global oil markets witnessed a wave of decline in early trading, affected by a major diplomatic step, namely the ceasefire agreement and the release of hostages in Gaza.

This development contributed to easing the geopolitical risk premium that had been supporting prices, as the likelihood of a severe disruption to oil supplies from the region receded.

Trading Details and Price Pressures

Brent and West Texas Intermediate crude oil prices fell 0.5% to $64.88 and $60.76 per barrel, respectively, extending the previous session's losses of 1.6%.

In addition to geopolitics, prices are facing downward pressure from multiple sources, most notably:

Surplus Concerns: As the OPEC+ alliance continues to gradually increase its production.

Weak Demand: The latest data on US crude inventories indicated a decline in demand, fueling concerns of a supply glut.

Loss Containment Factors and Analysts Forecasts

The picture isn't all doom and gloom. New US sanctions targeting Iranian oil financing and sales networks have helped contain some of the losses. The US Treasury Department targeted more than 50 individuals, entities, and vessels involved in facilitating sales and shipments of Iranian oil and liquefied natural gas.

ANZ analysts also believe that a drop in prices below $60 per barrel during the fourth quarter of this year would not be surprising, although any such decline would likely be limited in scope.

The bank offers its medium-term forecast, predicting that oil will gradually rise next year, with prices ranging between $60 and $65 per barrel during the first half of 2026.

The bank sees the possibility of prices rising to $70 by the end of 2026, under specific scenarios, most notably a strong recovery in global demand or new production cuts by the OPEC+ alliance to support prices.

Oil Crude oil The price of crude oil