Crude oil futures plunge 6%: Market tremors and global economic ripples under the intertwining of multiple factors

On October 28, there was a significant drop in the international crude oil futures market. WTI crude oil futures saw their intraday decline expand to 6%, falling to $67.5 per barrel and hitting a new intraday low. Brent crude oil futures also fell nearly 6%. This sharp drop in prices has attracted extensive attention and in-depth thinking in the market.

This plunge in crude oil futures is the result of the combined action of multiple factors. Firstly, the easing of geopolitical tensions is an important reason. Although conflicts in the Middle East are still ongoing, Israel's airstrike on missile bases in Iran over the weekend avoided oil and nuclear facilities. The Iranian authorities claimed that the airstrike caused limited damage and that its oil industry is operating normally. This situation has led traders to believe that the immediate escalation of the conflict and the possibility of affecting oil supplies are low, and the risk premium in the Middle East is gradually fading. Previously, tensions in the Middle East often led to market concerns about supply disruptions and thus pushed up oil prices. Now, the easing of the situation has redirected the market's attention back to potential demand concerns and broader economic factors.

From the perspective of supply and demand, weak global demand has become the main driving factor for the decline in crude oil prices. OPEC has downgraded its forecasts for global oil demand in 2024 and 2025 for the third consecutive month. In particular, the expected demand growth in Asia has not been as strong as expected. With the global popularity of electric vehicles, the growth of future crude oil demand may be further restrained. Data released by the U.S. Energy Information Administration shows that within the week ending October 11, U.S. daily oil production increased by 100,000 barrels to reach 13.5 million barrels. The increase in supply has also put pressure on oil prices.

In terms of economic data, the poor performance of macroeconomics has also had an impact on crude oil futures prices. The slowdown in global economic growth, the reduction in industrial production activities, and the decrease in transportation demand have led to a reduction in crude oil consumption. For example, in October, the New York Fed manufacturing index in the United States plummeted to -11.9%, far lower than the expected value of 3.6%. Boeing's layoff of 17,000 people also corroborates from the side the sluggishness of the manufacturing industry. The contraction of the manufacturing industry means a decline in demand for energy resources such as crude oil, which to some extent has pushed down crude oil prices.

Monetary policy is also one of the factors affecting crude oil futures prices. The adjustment of monetary policies of major global economies, especially interest rate changes in the United States, will affect the U.S. dollar exchange rate and thus the price of crude oil denominated in U.S. dollars. If the United States adopts a tightening monetary policy, it may lead to the withdrawal of funds from risky assets, and the price of oil futures will also fall.

The plunge in crude oil futures has a profound impact on the global economy. For crude oil importing countries, in the short term, a drop in oil prices can reduce energy costs, lighten the burden on enterprises and consumers, and promote economic growth. For example, low oil prices can reduce transportation and manufacturing costs, increase corporate profits, and stimulate investment and consumption. However, for oil-producing countries, a drop in oil prices may cause economic pressure and affect their fiscal revenue and economic growth. Countries relying on oil exports may face fiscal deficits and debt problems, which in turn will affect their domestic economic stability and balance of payments.

In the financial market, the decline in crude oil prices will affect the performance of related stocks and bonds. The share prices of oil companies may fall, and the default risk of energy-related bonds may increase. At the same time, the volatility in the crude oil futures market will also affect investor confidence and market stability, triggering a series of chain reactions.

Looking ahead, the trend of crude oil prices remains full of uncertainties. The situation in the Middle East is still one of the key factors affecting oil prices. If conflicts in the region escalate again, it may reignite market concerns about supply disruptions and push up oil prices. At the same time, factors such as the recovery of the global economy, changes in oil production, and adjustments in monetary policies will continue to have an important impact on crude oil prices. Investors and market participants need to closely monitor these changes in order to make accurate judgments and decisions.