(Bloomberg) — Oil fell more than 5% earlier in the week after Israeli strikes against targets in Iran spared the OPEC member’s crude facilities and raised the prospect of an easing of hostilities in the region.
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Brent traded below $73 a barrel and West Texas Intermediate was near $68 after paring some losses. On Saturday, Israeli jets struck military targets across Iran, vowing to retaliate for a missile attack earlier in the month, although the attack was more contained than expected.
The strike avoids oil, nuclear and civilian infrastructure, as requested by US President Joe Biden’s administration. Citigroup Inc. It cut its Brent price forecasts, citing lower risks from conflict in the Middle East.
Tehran did not immediately pledge to respond to the attack and Iran’s state media said the country’s oil industry operations were operating normally.
Iran’s missile attack on October 1 restored the war premium for oil, but Israel’s limited response will refocus the market’s attention on concerns about abundant supply and Chinese demand. Despite recent government stimulus, profits at the Asian nation’s industrial firms highlighted a weak outlook for the world’s biggest crude oil importer over the weekend.
“Israel’s response on Saturday was largely seen as underwhelming and disproportionate,” said Harry Tchilingourian, head of research at Onyx Capital Group.
OPEC+ plans to gradually resume oil production in December, and the market is watching for any change in that timeline. The producer group is scheduled to meet on December 1 to consider the emission policy for 2025.
Market gauges, however, show traders are still on edge over hostilities in the Middle East. Implied volatility for Brent is at its highest in a year, and options are maintaining a bullish hue. Calls – buyers profit when prices rise – are at a premium over the opposite positions. Brent contracts saw higher-than-usual volumes change hands during trading in Asia.
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