2024-09-26 News

Israel Won't Target Iran's Nuclear, Oil Sites; Oil Prices Drop to 2-Week Low

On Wednesday (October 16), in the early Asian market, international oil prices fluctuated within a narrow range, with U.S. crude oil currently trading near $70.90 per barrel. Oil prices fell by more than 4% on Tuesday, reaching their lowest level in nearly two weeks, due to weak demand prospects and media reports that Israel would not strike Iran's nuclear and oil facilities, alleviating market concerns about supply disruptions. Brent crude futures closed down $3.21, or 4.14%, on Tuesday, settling at $74.25 per barrel. U.S. crude futures closed down $3.25, or 4.4%, on Tuesday, settling at $70.58 per barrel. Earlier in the trading session on Tuesday, the two benchmarks plummeted by $4, reaching their lowest level since early October, after falling about 2% on Monday.

"We are seeing the war premium that accumulated last week being unwound," said Phil Flynn, a senior analyst at Price Futures Group. "What we are seeing is not a supply issue, but a risk issue of supply and demand."

So far this week, the two benchmarks have fallen by about $5, almost giving up all the gains that investors had accumulated after worrying that Israel might attack Iran's oil facilities in retaliation for Tehran's missile strike on October 1st. According to a report by The Washington Post at the end of trading on Monday, Israeli Prime Minister Netanyahu has told the United States that Israel wants to strike Iran's military targets, not nuclear or oil targets. The United States, Israel's closest ally, has expressed opposition to the scale of Israel's air strikes on Beirut in the past few weeks. The death toll from the current Middle East conflict is rising, and there are concerns that the situation involving Iran could escalate. U.S. State Department spokesman Miller said, "In terms of the scope and nature of the bombing operations we have seen in Beirut over the past few weeks, we have clearly expressed our concerns and opposition to the Israeli government." His tone was more severe than the attitude Washington has taken so far.

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The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both lowered their forecasts for global oil demand growth in 2024 this week, with the Asian powerhouse accounting for most of the downward revision. Andrew Lipow, president of Lipow Oil Associates, said that the OPEC+ alliance, which includes Russia, might adjust its production plans for the end of this year. He said, "I think OPEC+ will postpone the plan to increase production later this year."

The general weakness of stock markets in Europe and the United States on Tuesday also dragged down oil prices. Major U.S. stock indexes closed lower on Tuesday, with the technology-heavy Nasdaq index leading the decline with a 1% drop, weighed down by chip stocks falling due to demand concerns. The Dow Jones Industrial Average fell 324.80 points, or 0.75%, to 42,740.42; the S&P 500 index fell 44.59 points, or 0.76%, to 5,815.26; the Nasdaq index fell 187.10 points, or 1.01%, to 18,315.59. European stocks recorded their largest single-day drop in more than two weeks on Tuesday, with technology stocks causing the drag, after chip equipment manufacturer ASML's third-quarter earnings report leaked, with disappointing annual sales forecasts. The pan-European STOXX 600 index closed down 0.8%, with the technology sector falling 6.5%, marking the largest single-day drop since October 2020. The German DAX index closed down 0.1%, having earlier hit a record high. The UK's FTSE 100 index closed down 0.52%. The French CAC 40 index fell 1.05%.

Since Monday was Columbus Day in the United States, the API and EIA data, which are usually released every Wednesday, were delayed by one trading day this week. The API data will be released in the early morning of Thursday, Beijing time, and the EIA data will be released at 23:00 on Thursday, Beijing time. In addition, investors need to continue to pay attention to relevant news on geopolitical situations and changes in market sentiment.

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