Global oil prices are falling rapidly after a while Retaliatory attack from Israel Over the weekend, it targeted Iran’s military facilities rather than its energy infrastructure as feared.

Crude oil prices rose globally on October 2 after Iran Nearly 200 missiles were launched against IsraelIt is part of a rapidly escalating series of attacks between Israel and Iran and its Arab allies that threaten to bring the Middle East closer to a region-wide war.

Iran is the world’s 7th largest oil producer, but a wider conflict in the Middle East could impact some of the world’s largest energy producers in the region.

While many see this threat diminishing, at least in the near term, the price of benchmark U.S. crude oil and international benchmark Brent crude fell 6% on Monday. US crude oil has fallen well below $70 per barrel.

Israeli army He said his planes targeted surface-to-air missile sites as well as facilities used by Iran to build the missiles fired at Israel.

Let’s take a look at the current situation and outlook for oil and gas prices:

The short-term rise in prices ended as weak demand became the center of attention again

The price of benchmark U.S. crude fell 6 percent on Monday after Israel’s weekend retaliatory attack on Iran targeted military sites rather than oil fields in the world’s seventh-largest crude producer.

This puts the price of a barrel of U.S. crude oil well below $70, after rising above $77 earlier this month. Oil and gasoline prices have fallen sharply from annual highs in April. A gallon of gasoline can be purchased for less than $3 at more than half of the pumps in the United States, according to energy analysts.

The focus has returned to the fundamentals of global energy markets, which have been a story of abundant supply and falling demand this year. A chief driver Slowdown in economic growth in Chinaa large consumer of energy.

China’s economy grew at an annual rate of 4.6% in the July-September quarter, lagging the 4.7% annual growth in the previous quarter and below the official growth target of “about 5%” for 2024, Beijing said this month.

Conflict in the Middle East still rattles energy markets, but not as much as before

Prices rose briefly this month after Iran sent missiles to Israel, but many experts see Israel’s reaction over the weekend as follows: measuredAt least for now, both sides have the potential to end the cycle of retaliatory attacks.

And OPEC+ allianceCompanies made up of members of the producer cartel and allied countries, including Russia, have less influence on global prices than they did in the 1970s, when the oil embargo imposed after the start of the Yom Kippur war in 1973 quadrupled oil prices.

Since then, global oil supply has changed radically and the United States has become the world’s largest oil producer. The months-long war between Israel and Iran’s two proxies, Hamas and Hezbollah, has done little to raise prices for OPEC and its 12 oil-producing countries. Only the possibility of a direct conflict between Israel and Iran moved the needle.

These basics

The long-term expectation is that oil prices will decline rather than rise. This is because the balance between supply and demand is tilted towards the supply side, a dynamic that often drives down oil prices.

In its latest update on energy markets, the International Energy Agency said oil demand in the first half of this year increased by the lowest amount since 2020. Meanwhile, supplies continued to increase and oil prices OPEC+ alliance He said he plans to release more oil to the market starting in December.

What’s happening with energy prices this year?

Oil futures rose quickly to start the year, reaching $85 a barrel in April, but have been almost completely off since that point, with prices at the pump following suit.

U.S. gas prices loosely track crude oil because the price of oil accounts for half the cost of a gallon of gasoline. The price of a barrel of oil fell by $4 between Friday and Monday, when Israel launched a measured counter-attack on Iran.

OPEC has tried to set a floor for oil prices this year, but without much success.

Saudi Arabia and oil-producing allies extended production cuts into next year in June, hoping to shore up stagnant prices that have failed to recover despite turmoil in the Middle East and this year’s summer travel season.

At the same time, the United States is pumping unprecedented amounts of crude oil. The U.S. Energy Information Administration expects average daily crude oil production in the United States this year to be 13.2 million barrels, and expects production to only increase in 2025.

What will happen next in oil and gasoline prices?

Some energy experts believe oil prices have peaked this year and will continue to fall, possibly meaning more breaks for drivers.

“Limited Israeli attacks on Iran should ease fears of a broader war and slightly reduce the geopolitical premium on crude oil,” Tom Kloza, head of global energy analysis at the Oil Price Information Service, said in a social media post over the weekend. “Today’s U.S. retail gas average is $3.13/gal, and 55% of sites are priced at less than $3/gal.”

2025 looks even worse for oil producers, with “supply almost certainly 500,000 to 1 million barrels per day above demand,” Kloza told the AP this month.

Gasoline prices are already falling a week before the US presidential election.

According to auto club AAA, the national average price of $3.13 per gallon is down more than 4 cents from last week and is now down a whopping 37 cents per gallon from last year.

But in many states, prices are well below the national figure. The average price of a gallon in Texas is $2.67 and is close to that in many Southern States. Prices in the western states are much higher; Prices in California are close to $4.60.