"Israel Decides Military Facility Retaliation Instead of Oil... International Oil Prices Plunge Over 4%"

On the 15th (local time), international oil prices plunged by more than 4% following news that Israel decided to limit its retaliatory strikes against Iran to military facilities rather than oil facilities. This reduced concerns over a decrease in oil supply from Iran, exerting downward pressure on oil prices.

At the New York Mercantile Exchange that day, the near-month November delivery West Texas Intermediate (WTI) crude oil closed at $70.58 per barrel, down $3.25 (4.4%) from the previous trading day. The global benchmark Brent crude for December delivery also plunged $3.21 (4.14%) to close at $74.25 per barrel. International oil prices continued their two-day decline, deepening the drop from the previous day’s 2% range to over 4%.

Earlier, the Washington Post (WP) reported, citing multiple officials, that Israeli Prime Minister Benjamin Netanyahu conveyed to U.S. President Joe Biden during a phone call on the 9th that Israel would not strike Iran’s nuclear or oil-related facilities. A U.S. government official who disclosed this explained that Israel’s retaliatory measures would be adjusted to avoid perceptions of political interference in the U.S. presidential election. NBC News also reported on the same day, citing three Biden administration officials, that Israel’s retaliatory actions would be limited to military targets only.

This news immediately exerted downward pressure on oil prices. Until then, international oil prices had surged sharply amid concerns that Israel might strike Iran’s oil facilities. WTI and Brent futures prices had at one point this month exceeded $78 and $81 per barrel, respectively. Phil Flynn, senior analyst at Price Futures Group, said, "The accumulated war-related risk premium is being unwound." Helima Croft, global head of commodity strategy at RBC Capital Markets, appeared on CNBC and assessed that "geopolitical risk has disappeared from the market." However, she added that if Israel strikes Iran’s military facilities causing large-scale casualties, it could lead to further retaliation and renewed tensions.

Alongside this, disappointment over the Chinese government’s economic stimulus measures and forecasts of continued weakening oil demand also contributed to pulling oil prices down for two consecutive days. On the same day, the International Energy Agency (IEA) forecasted that global oil demand would increase by an average of 900,000 barrels per day this year and 1 million barrels per day next year, falling far short of the post-COVID-19 pandemic average increase of 2 million barrels per day. The day before, the Organization of the Petroleum Exporting Countries (OPEC) also lowered its demand growth forecast for this year from 2 million barrels per day to 1.9 million barrels per day, marking the third consecutive downward revision.