Oil falls 5% on reduced risk of wider Middle East war
1:09 pm Monday, October 28th, 2024
By Erwin Seba
HOUSTON (Reuters) -Oil prices tumbled by around $4 a barrel on Monday after Israel’s retaliatory strike against Iran’s military on Saturday bypassed oil and nuclear facilities, not disrupting energy supplies.
Brent futures were down $4.20, or 5.52%, at $71.83 a barrel at 11:37 a.m. CDT (1637 GMT), while WTI U.S. crude futures lost $4.08, or 5.68%, to $67.70.
Both Brent and U.S. West Texas Intermediate crude futures hit their lowest since Oct. 1 at the open.
“Obviously, this is a perfect example of a headline-driven market,” said Phil Flynn, senior analyst at Price Futures Group. “We still have a lot of geopolitical risk.”
The benchmarks gained 4% last week in volatile trade as markets reflected uncertainty over the looming U.S. election and the extent of Israel’s expected response to the Iranian missile attack of Oct. 1.
Scores of Israeli jets completed three waves of strikes before dawn on Saturday against missile factories and other sites near Tehran and in western Iran, in the latest exchange between the Middle Eastern rivals.
The attacks were more tailored towards military targets than U.S. officials had initially feared, amid concerns that Israel could retaliate by attacking Iran’s nuclear facilities or oil infrastructure.
Citi lowered its Brent price target for the next three months to $70 a barrel from $74, factoring in a lower risk premium in the near term, analysts led by Max Layton said in a note.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, kept oil output policy unchanged last month, including a plan to start raising output from December. The group will meet on Dec. 1 ahead of a full meeting of OPEC+.
Tudor, Pickering Holt analyst Matt Portillo said WTI could trade much lower in the coming year.
“Absent a flare-up in the Middle East, our base case for WTI in 2025 remains $65 a barrel, with a bias lower if OPEC+ doesn’t show significant constraint on returning volumes to the market,” Portillo said.
Tensions remain high following the attack, however, and Iran will “use all available tools” to respond to Israel’s weekend attack, Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Monday.
(Reporting by Erwin Seba; Additional reporting by Arunima Kumar, Robert Harvey in London, Florence Tan and Jeslyn Lerh in Singapore; Editing by David Evans and David Holmes)
