Oil prices dropped over $3 per barrel on Monday after Israel’s weekend strike on Iran avoided Tehran’s oil and nuclear sites, leaving energy supplies unaffected and easing regional tensions. Both Brent and U.S. West Texas Intermediate (WTI) crude opened at their lowest levels since October 1. By 0139 GMT, Brent was trading at $72.70 per barrel, down $3.35 (4.4%), while WTI fell $3.27 (4.6%) to $68.51.
Last week, oil benchmarks saw a 4% increase amid market volatility driven by uncertainty around Israel’s response to an October 1 missile attack by Iran, as well as the upcoming U.S. elections. Early Saturday, Israeli jets targeted missile production sites and other facilities near Tehran and in western Iran as part of an ongoing regional conflict.
Analysts noted that the risk premium on oil prices, previously elevated due to anticipated Israeli retaliation, has now reduced. “The limited scope of the strikes, which spared oil facilities, has fueled hopes of a pathway to de-escalation, bringing the risk premium down a few dollars,” said MST Marquee’s energy analyst Saul Kavonic.
Vivek Dhar from Commonwealth Bank of Australia noted that attention may shift to ceasefire discussions between Israel and Iran-backed group Hamas, which resumed over the weekend. “Despite Israel’s restrained approach toward Iran, we question whether Israel and Iran’s proxies (like Hamas and Hezbollah) are moving toward a long-lasting truce,” Dhar remarked in a report.
Citi adjusted its three-month Brent price forecast from $74 to $70 per barrel, citing a lower near-term risk premium, according to analyst Max Layton. Tim Evans, a U.S.-based analyst from Evans Energy, suggested the market may be undervalued and speculated that OPEC+ producers could delay their planned output increases beyond December.
In October, OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) maintained its oil production policy, which includes a planned production increase starting in December. The group will meet on December 1, followed by a full OPEC+ meeting.
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