On Monday, U.S. WTI crude oil plummeted by over 6%, marking the largest single-day drop in more than two years. This decline followed the weekend's events where Iranian energy facilities remained unscathed during an attack launched by Israel, easing market concerns over further escalation in the Middle East.
As of Monday's close, WTI December crude oil futures fell by $4.48, a decrease of 6.13%, to $67.38 per barrel, approaching the closing price of $67.19 on September 26 and $64.69 on September 10, the latter being the lowest closing price since June 12, 2023. Monday's drop was the largest single-day decline for U.S. oil since July 12, 2022, when oil prices plummeted by 7.93% in a single day.
Brent December crude oil futures closed down by $4.63, a decrease of 6.09%, at $71.42 per barrel, nearing the closing price of $71.09 on September 26 and $68.83 on September 10.
The Israel Defense Forces stated on the 26th that the military had completed "accurate and pinpoint strikes" on multiple military targets in Iran, with Israeli Air Force fighter jets safely returning to Israel. On the same day, the Iranian military claimed that they successfully defended against the Israeli attack, with "limited damage" caused by the Israeli operations.
Advertisement
For the crude oil market, the primary concern is whether Iran's oil facilities were targeted in the attacks. The latest Israeli strikes did not hit key oil and nuclear facilities, avoiding locations related to oil, nuclear energy, and civilian infrastructure. Iran accounts for approximately 4% of the global oil supply. Iran's oil industry news network, Shana, reported that Iran's oil industry operations are proceeding normally without interruption.
Citi analysts, in their latest report on Monday, stated that the market is unlikely to consider Israel's recent military actions as affecting the escalation of oil supply issues. Citi lowered its Brent crude oil price forecast for the next three months by $4, to $70 per barrel.
Currently, the prevailing view in the industry is that oil prices will continue to be under pressure for the remainder of the year, and it may be challenging for Brent crude prices to reach $80 in the foreseeable future. Some industry insiders have noted that due to Israel's deliberate avoidance of targeting Iran's crude oil facilities, possibly at the behest of the United States, the limited nature of the attacks has given the market hope for a de-escalation in the Middle East, thus reducing the risk premium and causing a drop of several dollars per barrel, bringing the oil market back to focusing on oversupply.
At present, oil production from major oil-producing countries such as the United States, Canada, and Brazil has been increasing, and smaller countries like Argentina and Senegal are also seeing an increase in their crude oil production.
However, some industry insiders have pointed out that it cannot be ruled out that Iran will retaliate against the attacks in the coming weeks, which could lead to a rise in the risk premium for the crude oil market once again. Some experts anticipate that direct conflicts between Israel and Iran may continue. Israel has stated that it has the capability and willingness to target Iran's energy and nuclear targets in future strikes.
For a long time, the two trends have been highly correlated, but recently there has been a deviation: U.S. Treasury yields have risen while oil prices have declined.