Oil falls more than 4% as the Israeli attack on Iran is unlikely to disrupt supplies

“The market is unlikely to view the recent Israeli military action as leading to an escalation affecting oil supplies,” Citi analysts wrote in a note on Monday, lowering the bank’s Brent crude forecast by $4 to $70 a barrel over the next three months. Months.

Oil markets are also oversupplied. “With Israel, and perhaps with some US encouragement, deliberately avoiding targeting crude oil facilities, the oil market has returned to looking at an oversupplied market,” said Andy Lipow, president of Lipow Oil Associates.

He added that oil production is increasing not only in major countries such as the United States, Canada and Brazil, but even among smaller players such as Argentina and Senegal.

“Oil prices will remain under pressure for the rest of this year, and it may be difficult to see Brent prices reaching $80 in the foreseeable future,” Lipow told CNBC via email.

The risk premium fell by a few dollars a barrel, as the limited nature of the strikes, including avoiding oil infrastructure, raised hopes for a de-escalation path, said Saul Cavonic, an energy analyst at MST Marquee.

The focus now will be on whether Iran will face attack in the coming weeks, which will see the risk premium rise again, Kavonic told CNBC, noting that the overall trend remains one of escalation, with the scope of another round of attacks remaining high. .

During the Cabinet session on Sunday. Iranian President Masoud Pezeshkian stressed Iran’s right to respond to the Israeli attackBut they stressed that they were not seeking war.

He said, “We do not seek war, but we will defend our country and the rights of our people. We will give a proportionate response to the aggression.”

Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia, said market attention would turn to the ceasefire talks between Hamas and Israel and Israel-Hezbollah that resumed over the weekend.

“Despite Israel’s choice of a low-aggression response to Iran, we have doubts that Israel and Iran’s proxies (i.e. Hamas and Hezbollah) are on the right track toward a permanent ceasefire,” Dhar wrote in a memo.