Brent crude prices have dropped to their lowest point since early May, settling at $62.73 per barrel – a decline of $2.49 or 3.82%. Invest with Domestic Drilling and Operating. The crude oil market shows remarkable stability since early August, despite ongoing Middle East tensions. NYMEX front-month crude stays mostly between $60/b and $65/b. The market recently shed some geopolitical risk premium after Israel and Hamas agreed to a ceasefire.

WTI crude oil prices fell to $58.70/bbl on Friday. The market faces several pressures right now. 1.2 billion barrels of oil float on ships worldwide – the highest seaborne crude level since 2016. Last week’s commercial crude oil inventories jumped by 3.7 million barrels. This adds to oversupply worries in the market. U.S. President Donald Trump’s threat to raise China tariffs creates more uncertainty about oil demand. The market seems to overlook a crucial risk factor. Limited spare production capacity could cause serious problems if geopolitical events disrupt oil supplies from key regions.

Oil prices hold steady amid Middle East ceasefire

The ceasefire agreement between Israel and Hamas has sparked major changes in global energy markets. Crude futures fell as traders took a fresh look at supply risks in the region. Oil prices reacted right away, showing how markets respond when political tensions cool down.

Ceasefire between Israel and Hamas reduces risk premium

Brent crude futures fell $2.16 (3.31%) to $63.06 per barrel after the ceasefire announcement. This was the lowest price since early June. At the same time, West Texas Intermediate crude dropped $2.15 (3.45%) to $59.40, hitting its lowest point since early May. These sharp drops show how markets quickly adjust when political risks fade.

“Finally having some kind of peace process in the Middle East is lowering the shoulders a little bit,” said Bjarne Schieldrop, chief commodities analyst at SEB. The ceasefire’s success removed fear-based pricing that had pushed values higher.

Phil Flynn, senior analyst with the Price Futures Group, explained it well: “President Trump’s ceasefire announcement immediately took the premium out of the price of oil, not only because of Israel and Hamas but also the reduction of a risk that Iranian proxies would continue to attack oil vessels in the Red Sea and other places”.

Oil prices settled about 1.6% lower after Thursday’s first announcement. Brent closed at $65.22 and WTI at $61.51. After Israel’s government approved the deal on Friday, prices kept falling and weekly losses ended up exceeding 4%.

Hostage exchange and troop withdrawal ease tensions

Several key parts of the ceasefire agreement helped stabilize the market. The deal stops all fighting, and Israel agreed to partly pull out from Gaza. Hamas will let go of all remaining hostages they captured during their first attack. Israel will release hundreds of Palestinian prisoners in return.

Israeli government spokeswoman Shosh Bedrosian said Hamas would have 72 hours to free the Gaza hostages once the ceasefire started. Israeli forces would pull back to an agreed line at the same time, keeping control of about half the area.

The deal makes it easier to reopen the Rafah crossing from Egypt. This allows more aid to reach Gaza. This detailed plan tackles urgent humanitarian needs while making shipping safer in key sea routes.

Claudio Galimberti, Chief Economist at Rystad Energy, shared his thoughts: “The peace agreement is a major breakthrough in recent Middle Eastern history – its implications for oil markets could be wide-ranging, from the possibility of a decrease in the Houthis’ attacks in the Red Sea to an increase in the likelihood of a nuclear deal with Iran…”. These changes help make vital oil transport routes safer.

Past ceasefires raise concerns about sustainability

Markets reacted quickly, but analysts remain careful about how long the ceasefire might last. Market watchers say traders recalculate supply risks faster when a ceasefire starts, which leads to several market changes:

1. Traders unwind speculative long positions they built during the conflict
2. Less hedging happens as protection becomes less important
3. Options premium drops for supply disruption protection instruments
4. Money moves away from “safe haven” energy assets

The agreement doesn’t solve several tough issues. Hamas’s disarmament, full Israeli withdrawal, and Gaza’s future governance remain uncertain. These open questions create doubt about lasting peace.

Past experience shows that when ceasefires break down, oil prices usually jump higher than the original risk premium drop. This “risk premium rebound” shows growing worries about conflict escalation and supply problems, which keeps affecting energy markets.

Daniel Hynes, an analyst at ANZ, pointed out, “The Gaza ceasefire deal means the focus can move back to the impending oil surplus, as OPEC proceeds with the unwinding of production cuts”. Market basics might overshadow political concerns for now, but experienced Middle East watchers and oil traders stay alert for signs of new problems.

OPEC+ increases output while demand remains weak

OPEC+ has chosen another modest production increase even as oversupply concerns grow. The group’s members steadily roll back production cuts from the 2020-2024 period. This shift changes the supply-demand balance in global oil markets.

November output matches October’s 137,000 b/d rise

OPEC+ will boost oil production by 137,000 barrels per day (bpd) in November, matching its October increase. The group remains cautious as worries about a supply glut continue. Their oil output targets have risen by more than 2.7 million bpd this year, about 2.5% of what the world needs. The coalition had mixed viewpoints before making this decision. Russia wanted to keep the increase small to protect oil prices, as sanctions from its war in Ukraine limit its production. Saudi Arabia wanted a more aggressive approach. They suggested doubling, tripling, or even quadrupling the increase (274,000 bpd, 411,000 bpd, or 548,000 bpd) since they have extra capacity and want their market share back faster.

Russia exceeds quota but still underperforms

Russia’s crude oil production reached 9.37 million barrels per day in September, its highest since April. The number still falls 47,000 barrels short of its September quota. Russian Deputy Prime Minister Alexander Novak said they’ve been slowly increasing production and almost met their quota last month. Ukrainian drone strikes on refineries created problems that led to this shortfall. Russia’s OPEC+ quota was 9.415 million bpd in September, showing the gap between what they promised and what they could deliver.

China’s stockpiling offsets some oversupply

China’s strategic petroleum reserves help balance the oversupply risks. Their stockpiling lets eight OPEC+ members reduce their voluntary cuts of about 2.5 million bpd without crashing prices. State firms like Sinopec and PetroChina plan to add 169 million barrels of storage across 11 new sites. These reserves work as part of Beijing’s emergency stockpile strategy, whatever their official label. This creates an interesting market balance. China buys more crude when prices stay low and stable, supporting the market floor. They cut imports when prices rise too high, creating a price ceiling.

Rystad Energy sees global liquids having a surplus around 2.2 million bpd in late 2025. Crude oil supply alone will be higher than demand by over 2.5 million bpd. They expect annual liquids supply to grow by about 2.5 million bpd in 2026. Global demand growth will likely stay under 1 million bpd.

US-China trade tensions weigh on global oil demand

Recent US-China trade tensions have shaken global energy markets. Crude prices dropped more than 3% on Friday, October 10th. The rocky relationship between the world’s largest economies continues to create uncertainty in oil markets.

Trump threatens new tariffs on Chinese goods

President Donald Trump raised trade tensions by threatening a “massive increase of Tariffs on Chinese products coming into the United States of America”. His announcement came as a response to China’s tough export controls on rare-earth minerals. Markets reacted sharply—U.S. crude oil fell $2.61, or 4.24% to close at $58.90 per barrel. Brent dropped $2.49, or 3.82% and settled at $62.73.

“When the market sees these tit-for-tat actions, for the oil market it translates into slower growth and maybe even declining demand,” said Andy Lipow, president of Lipow Oil Associates.

China retaliates with rare earth export controls

China expanded its rare earths export controls on October 9th by adding five new elements. The country also imposed extra scrutiny for semiconductor users. Foreign companies now need licenses to export products with more than 0.1% of Chinese-sourced rare earths. China controls this vital market with about 70% of global supply and 90% of processing capacity.

The country will deny licenses for defense-related applications to target critical sectors. These rules start on November 8th, right before a 90-day trade truce with Washington ends.

Impact on global trade and oil consumption

Past events show how trade tensions disrupt oil markets. WTI crude prices fell sharply during the 2018-2019 US-China trade disputes. Such conflicts breed uncertainty that hurts oil demand.

Several factors drive this change:

1. Major oil-consuming economies reduce industrial and manufacturing output
2. Factories cut back production and need less crude oil
3. Investors sell long positions and bet on price drops
4. IMF and other institutions lower global GDP growth forecasts

Price drops stem mainly from lower demand expectations rather than supply changes. China’s role as a key player means production cuts directly reduce crude oil use.

Market watchers now pay more attention to supply than geopolitics. This shift puts extra pressure on already weak crude oil prices.

Technical indicators suggest oversold crude market

Technical analysis of crude markets shows strong signals of an oversold condition. This prompts some traders to think about buying despite the bearish sentiment. Several indicators point to a price bounce that might happen soon.

WTI and Brent breach Lower-Bollinger Bands

November 2025 WTI NYMEX futures prices have dropped sharply below their 8-, 10- and 20-day Moving Averages. The prices subsequently breached the Lower-Bollinger Band limit. This technical breach shows a deviation of two standard deviations below the mean—traders usually see this as a buy signal. October 2025 WTI futures have also fallen below multiple short-term moving averages and now approach the Lower-Bollinger Band.

RSI signals potential buy chance

The Relative Strength Index (RSI), a crucial momentum oscillator, sits at 36—deep in oversold territory. Traders typically think about buying when RSI readings drop below 30. Some technical platforms show even more extreme conditions. RSI(14) reads just 12.296, which suggests severely oversold conditions.

Volume and moving averages show bearish trend

The oversold signals tell one story, but volume stays unremarkable at around 250,000-260,000 contracts. This suggests no rush toward panic selling or buying. Major moving averages continue to show strong sell signals. Technical analysis reveals 12 sell indicators against zero buy signals.

Analysts forecast winter volatility and storage shifts

Market analysts predict major changes as they get into inventory levels and supply disruptions before winter arrives.

Heating oil demand expected to rise in Northeast

Northeast homeowners might catch a break this winter, since this region uses more than 80% of heating oil. The Energy Information Administration projects that households using heating oil will pay about 5% less than last winter, with prices at $3.50 per gallon (9% lower than last winter). A typical home burns through 400 gallons during the season, which means spending around $1,410. The market’s healthy inventory levels help keep these prices down.

Tropical storms could disrupt Gulf production

The 2024 Atlantic hurricane season has already showed higher than average activity with 18 named storms, 11 hurricanes, and 5 major hurricanes. Storm disruptions in September caused unexpected shutdowns that averaged 295,000 barrels per day in Gulf oil production. This creates real concerns since the Gulf of Mexico produces about 17% of U.S. crude oil and 5% of natural gas. These disruptions can make prices volatile, especially when supplies get tight.

EIA reports rising inventories and production

Despite seasonal worries, crude oil inventories grew by 3.715 million barrels through October 3. This increase beats market expectations and points to weaker demand. Natural gas and propane storage levels stay above their five-year averages, which helps stabilize the market. However, distillate fuel stocks, including heating oil, remain just under historical averages.

Conclusion

Oil markets worldwide face a puzzling situation as prices stay surprisingly steady despite major geopolitical events. The Israel-Hamas ceasefire has without doubt removed much of the risk premium from crude prices. Brent has dropped to $62.73 per barrel. In spite of that, this change alone doesn’t explain why the market keeps facing downward pressure.

Multiple factors shape oil prices at the same time. OPEC+ managed to keep its modest production increases even with growing oversupply concerns. They added 137,000 barrels per day in November. On top of that, China’s strategic petroleum reserves created an unexpected buffer against market imbalances, though this support has limits. US-China trade tensions now threaten global economic growth and oil demand. This became clear after President Trump threatened massive tariffs following China’s rare earth export controls.

Technical indicators point to an oversold crude market. WTI futures have breached their Lower-Bollinger Bands and RSI readings sit firmly in territory that usually signals buying opportunities. Trading volumes remain unexceptional, that indicates no rush toward panic selling or buying.

Northeast homeowners might see some relief this winter. Heating oil prices should be about 5% lower than last year. Tropical storm disruptions could still bring volatility to Gulf production. Current inventory levels offer a modest cushion against severe price spikes. The oil market seems caught between bearish supply fundamentals and potentially bullish technical signals. This dynamic will likely continue as we approach the end of 2025.

Key Takeaways

Despite Middle East tensions easing, oil markets face a complex mix of oversupply concerns and technical signals that traders should monitor closely.

• Ceasefire removes risk premium: Israel-Hamas ceasefire drove Brent crude down 3.82% to $62.73/barrel, eliminating geopolitical fear-based pricing from oil markets.

• OPEC+ increases output amid weak demand: Producer group added 137,000 b/d in November while global supply surplus expected to reach 2.2 million b/d in Q4 2025.

• Trade tensions threaten oil demand: Trump’s tariff threats on China sparked 4% crude price drop, highlighting how trade disputes directly impact global oil consumption forecasts.

• Technical indicators signal oversold market: WTI breached Lower-Bollinger Bands with RSI at 36, suggesting potential buying opportunity despite bearish fundamentals.

• Winter heating costs expected to drop: Northeast homeowners may spend 5% less on heating oil this winter, with prices averaging $3.50/gallon due to healthier inventory levels.

The oil market remains caught between bearish supply fundamentals and potentially bullish technical signals, creating a volatile environment where geopolitical developments can quickly shift from risk premiums to oversupply concerns.