After rising by over $6 across the previous month and closing September at $95/bbl, largely due to the extension of Saudi Arabia and Russia’s supply cuts, Brent crude tumbled to $84/bbl in the first week of October. Although Saudi Arabia and Russia reaffirmed plans to continue output cuts until year-end, demand woes caused by high interest rates and the World Bank reducing China’s 2024 growth forecasts reduced oil prices, alongside easing supply constraints with Russia opting to lift its diesel exports ban. However, a coordinated surprise offensive on Israel marked the beginning of the Israel-Hamas war on the 7th of October. The United Nations stated that Gaza was on the brink of collapse, and escalating conflict ignited fears of the war spreading across the region. The turmoil in the Middle East caused prices to rise steadily due to concerns of further supply constraints, as Brent crude traded around $90/bbl by month-end, rebounding from $84/bbl at the beginning of the month.

GBP started trading at $1.212 against USD at the beginning of October, increasing marginally to $1.215 by month-end and remaining near its lowest level since March. The British pound remained weak across the month, underpinned by a strong US dollar which reached its highest level of 2023. The dollar’s strength was led by indications that the US Federal Reserve will raise interest rates again this year, as meeting minutes revealed that most officials deemed another hike appropriate. Meanwhile, the Bank of England’s Deputy Governor, Ben Broadbent, warned of ”clear signs” that interest rates are weighing on the economy, leading to higher unemployment. UK inflation data revealed that the Consumer Price Index (CPI) held at 6.7% in September, significantly above the 2% target rate, despite a series of interest rate hikes. However, core inflation declined by 0.1% between August and September, labelled as “quite encouraging” by the central bank’s Governor, Andrew Bailey, ahead of November’s interest rate decision. Overall, the growing interest rate gap between the US and the UK caused GBP to remain at a relatively weak level throughout October.

The Israel-Hamas war dominated energy news throughout October as expected, with widespread concerns about the unfolding humanitarian crisis in Gaza, as well as the impact on the already constrained global oil supply. Additionally, fears of escalation in the Middle East led to diplomatic efforts to prevent the Israel-Hamas conflict from spreading, as US president Joe Biden, Germany’s chancellor Olaf Scholz and UK Prime Minister Rishi Sunak all visited Israel, amongst other Western leaders. Whilst the International Energy Agency (IEA) has stated that the conflict has not had a direct impact on oil supplies, if the conflict widens to include Hezbollah or Iran, oil market repercussions are more than likely. Prior to the war, India raised concerns that oil prices are too high and are causing “demand destruction”, claiming that increased production is required from OPEC+. However, the UAE Energy Minister stated that fuel prices will be driven by a willingness to continue investing in fossil fuels, and pledged that OPEC+ will never target a particular oil price.