On Tuesday (October 15), at the opening of the New York Stock Exchange, international oil prices extended their decline. As of the time of publication, the main consecutive price of WTI crude oil futures fell by nearly 5%, briefly breaking through the $70 mark, and Brent oil also fell by nearly 4.5%.

At the opening of the U.S. stock market today, petroleum stocks collectively declined, with Apache Petroleum falling by nearly 5%, Murphy Oil and Occidental Petroleum falling by over 3%.

Israel is weighing the Biden administration's proposal and may abandon retaliatory actions against Iran's nuclear and oil facilities. Netanyahu's office stated, 'We will listen to the ideas of the U.S. government, but will make the final decision based on Israel's national security needs.'

Two informed officials revealed that Netanyahu has agreed to limit retaliatory actions to Iran's military targets, not oil or nuclear facilities. These news slightly eased the tense nerves of the Middle East geopolitics, relieving the biggest short-term risk of soaring crude oil prices.

The day before, OPEC lowered its global oil demand growth forecast for the third consecutive month. The institution expects global crude oil demand growth of 1.93 million barrels per day in 2024, down from the previous 2.03 million barrels per day; the growth forecast for 2025 is 1.64 million barrels per day, down from the previous 1.74 million barrels per day.

Previously, media reports indicated that individuals familiar with Saudi thinking revealed that Saudi Arabia will abandon the $100 per barrel oil price target and focus on resuming oil production increases in December this year. They explained that Saudi Arabia has decided not to continue to hand over market share to other oil-producing countries.

Since November 2022, in order to maintain high oil prices, Saudi Arabia has led multiple production cuts in OPEC+. However, while this organization has been cutting production, the United States' oil production has reached record levels, and even some member countries of OPEC+ have been unable to adhere to their production commitments.

Media analysis suggests that Saudi Arabia is planning to challenge the U.S. crude oil industry, using its lower extraction costs to force U.S. oil and gas companies to reduce or halt production, thus restoring market supply-demand balance. Earlier this month, a Saudi minister warned that oil prices could drop to $50 per barrel.

Researcher Luke Cooper from the London School of Economics commented that this could be the worst-case scenario for Russia, as compared to the United States, Russia is more reliant on petroleum. In contrast to Saudi Arabia, Russia's oil extraction costs are not low, leading to Russia's relatively poor ability to cope with low oil prices.

It should be noted that Saudi Arabia has done something similar in history. In 2014, Saudi Arabia began to significantly increase production, subsequently causing Brent crude oil prices to plummet, falling to as low as $25 per barrel at the end of 2015 and the beginning of 2016.

At that time, Saudi Arabia implemented a price reduction strategy to force the United States back to the negotiating table. However, unexpectedly, the shale oil at that time managed to survive by borrowing money and even thrived. Subsequently, Saudi Arabia had to persuade Russia to implement production cuts.

Cooper believes that if oil prices drop significantly in the future, Russia will have to spend more to extract deep oil wells, which will lower the profit margin of Russian oil, potentially triggering a short-term escalation in the Russia-Ukraine conflict, as the Russian army needs to make faster progress on the battlefield.

Two years ago, the European Union and the Group of Seven set a price ceiling of $60 per barrel for Russian oil exports. They believe that this price is close to the cost level of Russian oil, reducing Russia's energy income while avoiding production stoppages.

According to data from Russia, the country's GDP growth rate last year was 3.6%. However, Stefan Hedlund, Director of the Russia and Eurasia Studies Center at Uppsala University in Sweden, believes that Russia's growth data is just a mirage, with GDP being exaggerated by wartime spending.

Cooper said that if oil prices experience a similar drop as in 2014-2016, Russia will face difficulties in providing funds for war.

Editor/Lambor