Azernews.Az

Ulviyya Poladova

Read more

The rise in global oil prices is a significant economic development that directly affects the global economy, international trade, energy security and the revenues of oil-exporting countries.

One of the main factors driving oil prices higher is the threat posed by conflicts in the Middle East to energy infrastructure and oil transportation. Reports that a major oil refinery in Saudi Arabia was targeted in a missile attack earlier this morning have sparked fresh concerns in the market.

On the London exchange, Brent crude futures rose by 1.4% to $115.47 per barrel, while Light crude futures climbed to $101.33 per barrel. The Houthis have claimed responsibility for the attack.

According to the US Energy Information Administration (EIA), restrictions affecting production and export routes in the Middle East, rising tanker transportation costs and security risks are among the key factors pushing oil prices higher. The agency forecasts that prices could remain elevated until uncertainty surrounding the conflict subsides and inventories are replenished.

Another factor contributing to rising oil prices is the decline in global oil inventories. Stockpiles play a crucial role in offsetting unexpected supply disruptions. However, falling inventories make the market more vulnerable to further interruptions in supply.

Global observed oil inventories fell by 10 million barrels in October compared with the previous month. Declining stockpiles and supply problems affecting petroleum products, particularly diesel, are increasing market vulnerability.

The agency forecasts that global oil demand will also weaken in the fourth quarter of this year. Nevertheless, a market deficit could persist because supply losses are expected to outweigh the decline in demand.

This situation highlights an important point: rising oil prices do not necessarily indicate stronger demand. In some cases, prices increase even as consumption weakens. This happens when the volume of oil available on the market falls faster than demand declines.

Image: Orhan Qereman / Reuters