(Bloomberg) — Oil tumbled more than 5% at the start of the week after Israeli strikes against targets in Iran avoided the OPEC member’s crude facilities, raising the prospect for easing hostilities in the region.
Most Read from Bloomberg
Brent traded below $73 a barrel and West Texas Intermediate was near $68 after paring some losses. Israeli jets struck military targets across Iran on Saturday, delivering on a vow to retaliate for a missile barrage at the start of the month, though the attack was more restrained than expected.
The strike avoided oil, nuclear and civilian infrastructure, in line with a request from US President Joe Biden’s administration. Citigroup Inc. cut its Brent price forecasts citing lower risks from the conflict in the Middle East.
Tehran didn’t immediately vow to respond to the attack and Iran’s state media said that the country’s oil industry activities were working normally.
Oil has been buffeted by geopolitical risks in the Middle East, ample supply and lackluster demand growth in China. Profits at the Asian nation’s industrial firms over the weekend highlighted the weak outlook for the world’s biggest crude importer, despite recent government stimulus.
Israel’s “retaliation on Saturday was mostly viewed as underwhelming and proportionate,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “Poor macroeconomic realities centered around China will take over the narrative again to push the oil price lower.”
Brent’s three-month spread remains in a bullish, backwardated structure, but the gap has narrowed recently. The difference was 95 cents a barrel, compared with $1.15 at the end of last week.
Market metrics, however, still show traders remain on edge. A gauge of implied volatility for Brent is near the highest in a year, and options are retaining a bullish hue. Calls — which buyers profit from when prices rise — remain at a premium over the opposite puts.
There’s also higher-than-usual volumes of crude contracts changing hands, with over 175,000 lots of Brent traded by 9:28 a.m. in Singapore.
To get Bloomberg’s Energy Daily newsletter into your inbox, click here.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.