Oil prices continue to fall after Israel avoids targeting Iranian oil

on land Oil prices At the beginning of the week, after I avoided the strikes Israel against goals in Iran Crude resources in an OPEC member state, increasing the potential to reduce hostilities in the region.

West Texas Intermediate crude fell 6.1% to settle near $67 a barrel, the biggest one-day decline for the US benchmark in more than two years. Brent crude also fell 6.1%, settling below $72 a barrel.

Israeli aircraft struck military targets across Iran on Saturday, fulfilling its promise to respond to Iran’s attack with a missile barrage earlier this month, although the attack was more limited than expected. The strike avoided oil facilities, nuclear and civilian infrastructure, according to a request from the administration of US President Joe Biden.

The market’s political risk premium has shown signs of declining across the board. In addition to the decline in prices, the cost of options contracts that bet on the increase in prices decreased compared to those that bet on the decline. The fall extended deeper into next year, with the price for May Brent futures over June futures narrowing to 5 cents, a sign that traders expect a supply glut. to come

Iranian state media said the country’s oil facilities were operating normally, although the country’s Foreign Ministry said the nature of its response would be consistent with the nature of the attack.

High demand in China is affecting oil

The October 1st Iranian missile attack sent the price of oil back into the war, pushing the US benchmark above $75 a barrel earlier this month. However, prices are around $20 lower than in the first session after the October 7 attack that sparked the conflict last year, under the influence of weak Chinese demand and expectations of oversupply early next year.

“Concerns about supply disruptions have been largely eliminated from the global market,” said Dennis Kessler, senior vice president of trading at BOK Financial Securities, adding that traders are refocusing on weak demand. , with oil prices taking a turn the least resistance is down.

He continued that the drop of $4 in prices at the opening of the session created a so-called chart gap, which then triggered a corrective movement to fill the break, which helped prices to reduce losses.

Monday’s decline comes ahead of a critical few weeks for prices, with a number of impactful events looming, including the US elections. The OPEC+ alliance plans to return some production to the market in December, and the market is awaiting any changes to this timetable.

Although the planned increase in production in the short term is small, it will add supply to a market that the International Energy Agency predicts does not need it. Last week, hedge funds reduced their long positions in West Texas Intermediate crude to their lowest level in 14 years.