Oil rebounds after weekly slump

October 21, 2024 (MLN): Oil edged up on Monday after slumping 7.5% last week, with focus now on tensions in the Middle East, with Israeli Prime Minister Benjamin Netanyahu holding meetings with top aides to discuss the next attack on Iran.

Brent crude traded near $73.45 per barrel, up 0.53% on the day.

While West Texas Intermediate crude (WTI) was at $69.16 per barrel, up 0.68% on the day.

On Saturday, a Hezbollah drone exploded next to Netanyahu’s private home, and the following day Israel opened up a fresh military assault on Hezbollah strongholds in Lebanon, Bloomberg reported.

Israel has already vowed to retaliate against Iran for a missile attack at the start of October.

A dial up in Israel-Iran hostilities may potentially spark a wider regional conflict and could sway the outcome of the US presidential elections in early November.

Israel has said that it’s considering Washington’s qualms over its planned counterstrike on Iran, and President Joe Biden hinted over the weekend that he had details on Israel’s plans, but stopped short of revealing what they were.

Crude has had a volatile month as traders balance risks to flows from the Middle East, where Israel is facing off with Tehran and its proxies, against signs of weakening demand in China.

At the same time, the International Energy Agency has said rising global supplies could lead to a surplus next year, with OPEC+ set to restore some shuttered capacity in stages from December.

Netanyahu’s planning on Sunday for the strike on Iran saw him first meet with close advisers, then the security cabinet.

The US has counseled Israel against hitting energy targets in the third-largest OPEC producer, but the prime minister’s office has said the nation will make its own decisions.

“It looks like the market has discounted the probability of Israel mounting an Iranian attack before the Nov. 5 US election, at the very least,” said Vandana Hari, founder of energy-markets analysis unit Vanda Insights, referring to the presidential contest. “I expect range-bound trading, as crude awaits further cues for a leg up or down.”

While Middle East tensions remain elevated, Brent’s metrics point to physical conditions becoming less tight.

The crude benchmark’s three-month spread has narrowed to 93 cents a barrel in backwardation, down from $1.61 about one month ago, and well above $2 three months back.

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