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Affected by news after the US stock market on Monday that Israel will not strike Iranian oil facilities, coupled with the International Energy Agency (IEA) warning of an oil supply surplus in its latest monthly report, oil prices plummeted on Tuesday, falling more than 5% at one point during trading. The WTI November crude oil futures closed down $3.25, a decrease of 4.40%, at $70.58 per barrel. The Brent December crude oil futures closed down $3.21, a decrease of 4.14%, at $74.25 per barrel.

The IEA stated that ample oil supplies offset geopolitical risks, and the oil market faces a supply surplus in the new year. Geopolitical risks to oil production in the Middle East and other regions are being offset by ample global supplies, thereby controlling oil prices. Although geopolitical risks pose a threat to the energy infrastructure in the region, the growth in production from non-OPEC+ countries such as the United States, against a backdrop of near-record idle capacity within the OPEC+ alliance, is expected to cause a supply surplus by early 2025.

The IEA pointed out that oil supplies continue to flow into the market, and in the absence of significant disruptions, the market will face a substantial supply surplus in the new year, which will replenish the current low levels of inventory. The slow growth in world oil demand will pale in comparison to the increase in supplies outside the OPEC+ alliance. Supplies from the United States, Brazil, Canada, and Guyana are all increasing.

The IEA's expectations for global market demand, supply, and production for the current and next year are as follows:

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The IEA revised down its forecast for oil demand growth in 2024 by 40,000 barrels per day (bpd), expecting global oil demand to grow by 860,000 bpd in 2024 and by 1 million bpd in 2025. Compared to the 2 million bpd growth in 2022-2023, the global oil demand growth rate will slow down significantly. The IEA expects global oil demand to be 102.8 million bpd in 2024 and 103.8 million bpd in 2025. The IEA expects China's oil demand to grow by 150,000 bpd in 2024.

The IEA expects global oil supply to increase by 660,000 bpd in 2024, reaching 102.9 million bpd. Oil supplies from non-OPEC+ countries are expected to increase by about 1.5 million bpd in both 2024 and 2025.

The IEA revised down its global crude oil production forecast for 2024 by 180,000 bpd to 82.8 million bpd and for 2025 by 210,000 bpd to 83.4 million bpd.

The IEA also stated in its monthly report that oil supplies fell by 640,000 bpd in September due to production cuts in countries such as Libya. Global observed oil inventories decreased by 22.3 million barrels in August.

The sharp decline in oil prices on Tuesday somewhat reduced market expectations for a resurgence in inflation, and coupled with the high investor risk aversion as US stocks fell, it drove US Treasury bonds to rise on Tuesday, with the 10-year US Treasury yield falling by nearly 7 basis points, and long-term US Treasury bonds recording a significant increase that has been rare for some time. German and UK government bond yields fell by as much as 6 basis points.

Christoph Rieger, head of rates and credit research at Commerzbank, said that recently traders seem to have connected their machines to crude oil futures. In this context, whether it is reasonable to adjust long-term inflation views is another question.