SINGAPORE: Oil prices fell by more than $3 per barrel on Monday, following Israel's retaliatory strike against Iran over the weekend. The attack bypassed Tehran's oil and nuclear facilities, thereby not disrupting energy supplies and easing geopolitical tensions in the Middle East.

Both Brent and US West Texas Intermediate crude futures reached their lowest levels since October 1 at the market open. By 8:14 a.m. Saudi time, Brent was trading at $72.59 per barrel, down $3.46, or 4.6 percent, while WTI dropped $3.37, or 4.7 percent, to $68.41 per barrel.

The benchmarks had gained 4 percent last week amid volatile trading, as markets anticipated the extent of Israel's response to Iran's missile attack on October 1 and the upcoming US election.

Israeli jets conducted three waves of strikes before dawn on Saturday, targeting missile factories and other sites near Tehran and in western Iran. This marked the latest escalation in the ongoing conflict between the Middle Eastern rivals.

Analysts noted that the geopolitical risk premium, which had been factored into oil prices in anticipation of Israel's retaliatory attack, had decreased.

"The limited nature of the strikes, particularly the avoidance of oil infrastructure, has raised hopes for a de-escalatory pathway, leading to a reduction in the risk premium by a few dollars per barrel," said Saul Kavonic, a Sydney-based energy analyst at MST Marquee.

Commonwealth Bank of Australia analyst Vivek Dhar anticipates market focus to shift towards ceasefire talks between Israel and the Iran-backed militant group Hamas, which resumed over the weekend.

Citi lowered its Brent price target for the next three months to $70 per barrel from $74, considering the reduced risk premium in the near term, according to analysts led by Max Layton.

Tim Evans at US-based Evans Energy noted: "We believe this leaves the market somewhat undervalued, with the possibility that OPEC+ producers may delay the planned increase in output targets beyond December."

In October, OPEC and its allies, collectively known as OPEC+, maintained their oil output policy, including plans to increase production from December. The group is scheduled to meet on December 1, ahead of a full OPEC+ meeting.

Source link:   https://www.arabnews.com