Investing.com – It fell more than 5% in early trading this week, Monday, after Israeli strikes bypassed oil facilities in OPEC member Iran, raising the possibility of easing hostilities in the region.
It was trading below $73 a barrel and WTI was near $68 after cutting some losses, down nearly 5% during today’s trade.
Israeli aircraft struck military targets across Iran on Saturday, fulfilling its promise to respond to a missile barrage launched by Iran at the start of the month.
The Israeli strike avoided oil infrastructure, nuclear facilities and civilians, according to a request from the administration of US President Joe Biden.
Meanwhile, Citibank lowered its forecast for the price of Brent crude, citing lower risks due to the conflict in the Middle East.
A source of great fear in the markets
Tehran did not immediately promise to respond to the attack and Iranian state media said the country’s oil facilities were operating normally. In the last few days, this issue has been the cause of great fear and raised fears of a major disruption in global supply, which led to an increase in oil prices last week. Analysts said that the geopolitical risk premium that had risen in oil prices, in anticipation of an Israeli attack, had decreased.
The missile attack by Iran on October 1 had brought the price war on oil back, but the limited response is likely to focus the market on abundant supply and concerns about Chinese demand. Profits made by industrial companies in the Asian country over the weekend highlighted the weak outlook for the world’s largest crude oil importer, despite recent government stimulus.
Both benchmarks posted gains of around 4 percent last week in volatile trading as markets absorbed uncertainty over the scale of Israel’s response to Iran’s October 1 missile attack, and the elections in SA next month.
Fears of widespread conflict are receding
The limited nature of the strikes, including avoiding oil infrastructure, has raised hopes of finding a way to calm hostilities in the Middle East, especially if it becomes clear that Iran will not respond the attack, said Sol Cavonic, an energy analyst at MST. Markey in the coming days.
“The strike by Israel, which carefully avoided energy sites, reduced fears of a major conflict with Iran,” explained Stephen Innes, an analyst at SBI Asset Management. He said that Iran’s response reduced the impact of the attack, which reduced the geopolitical risks. “If tensions continue to ease or peace talks gain unexpected momentum in the Middle East, we may see oil drop to $60 a barrel,” he said.
OPEC + plans to begin the gradual recovery of oil production in December, and the market is looking for any change in this timeline. Representatives are expected to meet on December 1 to discuss production policy for 2025.
However, market metrics continue to show that traders remain concerned about hostilities in the Middle East. The Brent crude volatility index is near one-year highs, and options are maintaining a bullish outlook. Call options – which buyers benefit from when prices rise – still outperform put options.
2024-10-28 08:29:00
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