Written by Colleen Howe and Emily Chow
SINGAPORE (Reuters) – Oil prices tumbled during trading on Monday as market participants trimmed their risk premiums following an Iranian attack on Israel late on Saturday that the Israeli government said caused limited damage. It fell.
At 0430 GMT, Brent futures for June delivery were down 23 cents, or 0.2%, at $90.22 a barrel, while West Texas Intermediate (WTI) futures for May delivery were trading at 29 cents, or 0.2%, at $90.22 a barrel. 3%) to $85.37 per barrel.
The attacks by more than 300 missiles and drones are the first against Israel by another country in more than 30 years, raising concerns about a broader regional conflict affecting oil shipments through the Middle East.
However, the attack, which Iran claimed was in retaliation for an airstrike on the Damascus consulate, caused only minor damage as the missile was shot down by Israel's Iron Dome defense system. Israel, which is at war with Iran-backed Hamas militants in the Gaza Strip, has neither confirmed nor denied the attack on the consulate.
Warren Patterson, head of product strategy at ING, said: “The attack was largely priced in days in advance, and the fact that the damage was limited and there was no loss of life suggests that Israel's response will be more cautious.'' This means that there is a possibility that
“But obviously there is still a lot of uncertainty and it all depends on how Israel responds.”
Supply risks include more strictly enforced oil sanctions, as Iran currently produces more than 3 million barrels per day (bpd) of crude oil as a major producer within the Organization of the Petroleum Exporting Countries (OPEC). Israel's response could include targeting Iran's energy infrastructure. ING said in a customer note on Monday.
But while OPEC has more than 5 million barrels a day of surplus production capacity, the U.S. could release more crude from the Strategic Oil Reserve if there were significant supply losses.
“One would imagine that if prices rise significantly on the back of supply losses, the group will try to put some of this spare capacity back into the market. You don't want that to rise too much.” ”
Oil indexes rose on Friday in anticipation of Iranian retaliatory strikes, hitting their highest since October.
Despite the limited damage, analysts said this morning that at least a short-term price increase was expected, although more significant and long-term price impacts from the rise could include restrictions on shipping across the Channel. , expected that significant disruptions to supply would be necessary. Hormuz Island near Iran.
So far, the conflict between Israel and Hamas has had little visible impact on oil supplies.
Analysts at ANZ Research said: “The attack on the Iranian embassy in Syria and Iran's retaliation are increasing tensions in the Middle East. We cannot expect an immediate response.” With notes.
“Israel's response will determine whether the escalation ends or continues. The conflict could still be contained to Israel, Iran and its proxies, and there is also the possibility of US involvement. It only affects in extreme cases.”
Analysts at Citi Research said tensions persisted into the second quarter of this year, with oil prices hovering around $85 to $90 a barrel. As the market has been mostly balanced between supply and demand throughout the first quarter, prices could fall sharply to the high $70s or low $80s per barrel once tensions ease.
“What is not priced into the current market, in our view, is the possibility of a continuation of direct conflict between Iran and Israel, with oil prices exceeding $100 per barrel depending on the nature of the situation. We estimate that a trade is likely,” analysts said in a note.
(Reporting by Colleen Howe in Beijing and Emily Chow and Florence Tan in Singapore; Editing by Christopher Cushing and Sri Navaratnam)
