The oil prices fell sharply Monday, after Iran did not announce an immediate response to Israel’s attacks on the country.
Brent and US West Texas Intermediate crude futures have both fallen to their lowest levels since the September 11 attacks. Brent crude, which is the international benchmark for crude oil, fell $4.63 or 6.1 percent, reaching $71.42 per barrel. The US benchmark WTI was down $4.40 or 6%, at $67.38 per barrel.
Israel claimed that it had targeted military sites in Saturday’s attack as a retaliation to a barrage by Iran of nearly 200 ballistic missiles launched towards Israel on October 1.
Ali Khamenei said the Israeli attacks, in which at least four soldiers were killed, should not “be exaggerated or underplayed”, but he did not call for an immediate strike of retaliation.
Khamenei’s remarks and the fact that Israel did not attack Iran’s nuclear and oil facilities, allayed fears of escalation into a full-blown Middle East war and eased worries about oil supply disruption.
The sharp drop in oil prices has dragged the share prices down of all the major FTSE 100 Energy Groups. BP and Shell both closed at 1.4 percent.
Citigroup, an investment bank in the US, has lowered its Brent target price for the next three-months to $70 per barrel, from $74, taking into account a lower premium on risk in the short term.
Investors’ attention has shifted to the plans of the Organisation of the Petroleum Exporting Countries (Opec+), including Russia, to increase output in December.
Opec+ has agreed to a series steps since the end of 2022 that will reduce production by 5.86 million barrels per day or approximately 5.7% of global demand.
Ashley Kelty is an analyst with Panmure Liberum. She said that the rhetoric from Opec+ Ministers around the unwinding quotas in the coming weeks will be key for prices. A postponement of production increases becomes more likely because of the weak fundamental outlook and the high break-even price needed by most cartel members.
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