Oil futures: Crude slumps 4.5% as US deters Israel from Iranian oil strikes
Quantum Commodity Intelligence – Crude oil futures Tuesday were in sharp retreat from the early-week highs amid uncertainty over Israel's likely response to Iran's 1 October missile attack and an reversal in the so-called the risk premium.
Front-month Dec24 ICE Brent futures were trading at $77.36/b (1900 GMT), compared to the day's wide range of $76.36-$81.14/b and Monday's settle of $80.93/b.
At the same time Nov24 NYMEX WTI was trading at $73.77/b versus Monday's settle of $77.14/b.
Initial speculation that Israel could target Iran's oil and nuclear infrastructure has been tempered, with the US and Western allies pushing Jerusalem into a more measured response.
Israel Defense Minister Yoav Gallant is due to fly to Washington on Tuesday with talks set to focus on security coordination with the US, including a meeting with US Defense Secretary Lloyd Austin on Wednesday.
The US Administration and its allies have been blunt about opposition to strikes that target either Iran's oil fields or its nuclear facilities, fearing an all-out conflict could have a devasting impact on the global economy.
However, hardline factions within Israel are said to be still keen to target oil infrastructure and cut off Tehran's primary funding source.
Prices also rowed back after Hezbollah deputy leader Naim Qassem said that his organization wants a ceasefire with Israel, with terms to be decided after Israel halts military activities, according to a Reuters report.
Between last Tuesday's low of just under $70/b and this Monday's peak, Brent had soared by $11/b, or 15%, the strongest weekly rise in more than a year as supply concerns over a wider Middle East conflict overshadowed any worries on slowing oil demand.
Monday's London Brent close was the highest since mid-August.
OPEC+
Without a major escalation of the Middle East conflict, oil supplies look set to grow with OPEC+ scheduled to add around 200,000 bpd monthly from December. Non-OPEC+ producers, including the US, Brazil, Guyana and Norway, all have plans to increase next year.
Prices also came under pressure after Libya's National Oil Company (NOC) said Tuesday domestic production of crude oil and condensates had recovered to 1.13 million bpd, while full capacity is expected within the next few days.
The demand side also continues to struggle, with China 2024's consumption numbers falling well below expectations, while India's demand growth has flatlined over the summer.
Elsewhere, Hurricane Milton led to Chevron shutting its 65,000 bpd Blind Faith platform, but the massive Category 5 storm has largely avoided offshore platforms in the Gulf. However, the storm has caused widespread shipping disruptions.
