Oil prices fell sharply on October 28, 2024, with Brent crude dropping over $3 per barrel following Israel's limited military response to Iran over the weekend. This reaction did not target Iran's oil or nuclear facilities, leaving energy supplies unaffected.
Brent crude futures reached $72.92 per barrel, down $3.13 or 4.1%, while West Texas Intermediate (WTI) fell by $3.15 or 4.4% to $68.63 per barrel as of 07:50 GMT. The drop follows a volatile week where oil prices had risen by 4% amid uncertainties regarding Israel's response to Iran's missile attacks on October 1 and the upcoming U.S. elections.
Israeli fighter jets conducted three waves of strikes targeting missile factories and other locations near Tehran, escalating tensions in the region. Analysts noted that the geopolitical risk premium previously factored into oil prices has diminished due to the restrained nature of Israel's attacks.
Saul Kavonic, an energy analyst based in Sydney, indicated that the limited scope of the strikes has raised hopes for de-escalation, resulting in a decrease in risk premiums by several dollars per barrel. The market remains vigilant for any retaliatory actions from Iran that could reverse this trend.
Commonwealth Bank of Australia analyst Vivek Dhar highlighted that market focus may shift toward ongoing ceasefire discussions between Israel and Iranian-backed Hamas. Despite Israel's restrained military response, concerns remain regarding the stability of a lasting ceasefire.
Citi has revised its Brent crude price target for the next three months down to $70 per barrel from $74, reflecting a lower risk premium in the near term. Tim Evans from Evans Energy noted that the market might be undervalued, particularly if OPEC+ producers delay planned production increases after December.
In October, OPEC+ maintained its oil production policy unchanged, with plans to begin increasing output in December. The group is set to meet on December 1 ahead of its full OPEC+ meeting.