Singapore, Oct. 28, 2024 – Oil tumbled more than 5% at the start of the week after Israeli strikes against targets in Iran avoided the OPEC member’s crude facilities, raising the prospect for easing hostilities in the region.
Brent traded below $73 a barrel and West Texas Intermediate was near $68 after paring some losses. Israeli jets struck military targets across Iran on Saturday, delivering on a vow to retaliate for a missile barrage at the start of the month, though the attack was more restrained than expected.
The strike avoided oil, nuclear and civilian infrastructure, in line with a request from US President Joe Biden’s administration. Citigroup Inc. cut its Brent price forecasts, citing lower risks from the conflict in the Middle East.
Tehran didn’t immediately vow to respond to the attack and Iran’s state media said that the country’s oil industry activities were working normally.
Iran’s missile attack on Oct. 1 restored a war premium to oil, but the limited response from Israel is likely to refocus market attention on plentiful supply and concerns over Chinese demand.
Profits at the Asian nation’s industrial firms over the weekend highlighted the weak outlook for the world’s biggest crude importer, despite recent government stimulus.
Israel’s “retaliation on Saturday was mostly viewed as underwhelming and proportionate,” said Harry Tchilinguirian, group head of research at Onyx Capital Group.
“Poor macroeconomic realities centered around China will take over the narrative again to push the oil price lower.”
OPEC+ plans to starting gradually reviving oil production in December, and the market is watching for any change to that timeline. The producer group is scheduled to meet Dec. 1 to consider output policy for 2025.
Market metrics, however, still show traders remain on edge about hostilities in the Middle East. A gauge of implied volatility for Brent is near the highest in a year, and options are retaining a bullish hue.
Calls, which buyers profit from when prices rise, remain at a premium over the opposite puts. Higher-than-usual volumes of Brent contracts changed hands during trading in Asia. (Bloomberg)
