Oil Plunges as Israel Limits Iran Strike to Military Targets
Oil plunged at the start of the week after Israeli strikes against targets in Iran avoided the OPEC member’s crude facilities, raising the prospect that hostilities in the region may ease.
West Texas Intermediate plummeted 6.1% to settle near $67 a barrel, the biggest one-day drop for the US benchmark in more than two years. Brent slid 6.1% to settle below $72 a barrel.
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.
The market’s political risk premium showed signs of fading across the board. In addition to falling prices, the cost of bullish options contracts plunged relative to bearish ones. The rout extended deep into next year, with the premium for Brent’s May futures over June futures narrowing to as low as 5 cents, a sign that traders foresee an impending supply glut.
Iran’s state media said that the country’s oil facilities were working normally, though the country’s foreign ministry said the nature of its response will correspond to the type of attack carried out.
Iran’s missile attack on Oct. 1 restored a war premium to oil that pushed the US benchmark above $75 a barrel earlier this month. Still, prices are almost $20 lower than the first session after the Oct. 7 attack that sparked the conflict last year, with the decline driven by lackluster Chinese demand and expectations of an oversupply early next year.
WTI for December delivery declined 6.1% to settle at $67.38 a barrel in New York. Brent for December settlement tumbled 6.1% to settle at $71.42 a barrel.
Source : Bloomberg
