“The more limited nature of the strikes, including avoiding oil infrastructure, has raised hopes for a de-escalatory pathway, which has seen the risk premium come off a few dollars a barrel,” noted Saul Kavonic, energy analyst with MST Marquee told Reuters.
Brent futures dropped to $71.62, while WTI stood at $67.42, both experiencing losses of nearly 6% on Monday.
Analysts view the targeted operation as one that tempers fears over regional supply disruption, with Citi analysts commenting, “The recent Israel military action is unlikely to be seen by the market as leading to an escalation that impacts oil supply,” leading the bank to revise down its Brent forecast by $4 to $70 per barrel for Q4.Economic factors take precedence
Economic concerns, particularly China’s slow recovery, are now placing additional downward pressure on crude prices. China reported a sharp 27% year-on-year decline in September’s industrial profits, reigniting concerns about declining demand from the world’s largest crude importer.
Also read: Oil prices slump 5% as Israel limits Iran strike to military targets
A recent report from the International Energy Agency projected that oil demand growth will slow sharply through 2025, with Chinese demand in focus as green energy policies take precedence.
“Poor maroeconomic realities centred around China will take over the narrative again to push the oil price lower,” Harry Tchilinguirian, head of research at Onyx Capital Group, told Bloomberg.
On the supply side, OPEC+ is set to gradually unwind its production cuts from December, with a planned increase of 180,000 barrels per day. However, the increase has met muted expectations as oversupply risks remain, with Andy Lipow of Lipow Oil Associates observing that “oil prices will remain under pressure for the rest of this year.”
First Published: Oct 28, 2024 3:33 PM IST
