IEF – Comparative Analysis, October 2023

The recent crisis in Israel and Gaza has led to increased geopolitical risk in the Middle East, although it has not directly impacted oil supplies. Market participants have priced in a risk premium of around $3 per barrel for oil due to the crisis. Prior to an attack by Hamas on October 7th, Brent oil prices had dropped $14 per barrel due to concerns about global economic and demand issues. Weekly data for the end of September showed a significant decline in gasoline demand and an increase in inventories, although this data is subject to volatility and revisions. The International Energy Agency (IEA) warned that elevated energy prices have led to demand destruction in Nigeria, Pakistan, and Egypt, particularly for gasoline. However, demand in other countries such as China, India, and Brazil continues to grow robustly. The IMF published its World Economic Outlook, revising its inflation forecast for 2024 upward to 5.8% and lowering its global growth outlook for next year to 2.9%. Saudi Arabia and Russia have extended their voluntary production cuts through December, with the possibility of further cuts or reversals in the future. The next OPEC+ Ministerial Meeting is scheduled for November 26th.