Oil prices plummeted nearly 6% following Israel's recent military actions against Iran, which avoided targeting oil and nuclear facilities. This move alleviated concerns over potential disruptions in energy supplies. Both Brent Crude and WTI Crude reached their lowest levels since early October, with Brent falling over $4 and declining more than 5%, while WTI dropped over $4, nearly a 6% decrease.
Previously, Brent Crude had surged 4% in a volatile market as uncertainties loomed over the U.S. election and Israel's anticipated response to Iran's missile attacks earlier this month. Israel executed multiple airstrikes near Tehran and western Iran, marking the latest clash in the region. Analysts noted that the geopolitical risk premium that had been factored into oil prices due to potential Israeli strikes has now dissipated.
John Evans from oil brokerage PVM highlighted that Israel's response was significantly influenced by the Biden administration, particularly ahead of the U.S. election. Meanwhile, Commonwealth Bank of Australia's analyst Vivek Dhar projected that conflicts in the Middle East would not ease quickly. Despite Israel's low-aggression approach, there are doubts about lasting ceasefires between Israel and Iran's allies, Hamas and Hezbollah.
Citi's analysts, led by Max Layton, revised the three-month Brent Crude target price from $74 to $70 per barrel, considering the recent reduction in risk premium. Additionally, Ashley Kelty from Panmure Liberum emphasized that OPEC+ ministers' discussions on quota cuts will be crucial for oil prices. Given the weak fundamental outlook and the high break-even prices needed by most OPEC members, the likelihood of delaying production increases is growing.
OPEC+ had previously decided to maintain its oil production policy, including planned increases starting in December. The Joint Ministerial Monitoring Committee of OPEC+ is scheduled to meet for their next discussion at the beginning of December.
