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OIL: Crude Corrects Following Israel’s Restrained Attack On Iran

OIL
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Oil prices have corrected sharply following comments from leaders in Iran and Israel that imply that neither side want an escalation in hostilities following Israel’s attack on Iranian military targets on the weekend. The crude market had been concerned that Iran’s oil infrastructure would be targeted and so the geopolitical risk premium is being unwound in relief. Gaza ceasefire talks have also restarted.

  • WTI is down 4.6% to $68.50/bbl today after falling to around $67.80 on the open before rising to $68.84. It is holding above initial support at $68.17. The US dollar is also weighing on oil as the BBDXY index has risen another 0.2% today after 0.3% on Friday as US yields continue to rise.
  • Brent is 4.4% lower at $72.67/bbl after sinking to $72.00, below initial support at $72.50, but the break was not sustained.
  • Citigroup has cut its Brent forecast $12 to $60/bbl 12-months ahead due to the reduction in the Middle East geopolitical risk premium, according to Bloomberg. Its now to 3-months projection has been reduced $4 to $70/bbl. Citigroup has also decreased its estimate of a significant jump in prices to a 10% probability from 20%.
  • Weak industrial profit data in China is also likely adding to pressure on oil. The market has been concerned for some time about the strength of demand in the world’s largest crude importer. With the risk of disruption to Iranian supply diminishing, the focus is likely to return to China.
  • There are few events or data today. The October US Dallas Fed manufacturing index and Spain’s September retail sales print. The ECB’s de Guindos speaks. 
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Oil prices have corrected sharply following comments from leaders in Iran and Israel that imply that neither side want an escalation in hostilities following Israel’s attack on Iranian military targets on the weekend. The crude market had been concerned that Iran’s oil infrastructure would be targeted and so the geopolitical risk premium is being unwound in relief. Gaza ceasefire talks have also restarted.

  • WTI is down 4.6% to $68.50/bbl today after falling to around $67.80 on the open before rising to $68.84. It is holding above initial support at $68.17. The US dollar is also weighing on oil as the BBDXY index has risen another 0.2% today after 0.3% on Friday as US yields continue to rise.
  • Brent is 4.4% lower at $72.67/bbl after sinking to $72.00, below initial support at $72.50, but the break was not sustained.
  • Citigroup has cut its Brent forecast $12 to $60/bbl 12-months ahead due to the reduction in the Middle East geopolitical risk premium, according to Bloomberg. Its now to 3-months projection has been reduced $4 to $70/bbl. Citigroup has also decreased its estimate of a significant jump in prices to a 10% probability from 20%.
  • Weak industrial profit data in China is also likely adding to pressure on oil. The market has been concerned for some time about the strength of demand in the world’s largest crude importer. With the risk of disruption to Iranian supply diminishing, the focus is likely to return to China.
  • There are few events or data today. The October US Dallas Fed manufacturing index and Spain’s September retail sales print. The ECB’s de Guindos speaks.