Oil prices are headed for their sharpest daily decline in a year as the world faces a looming supply glut and reports suggest Israel will avoid targeting Iran’s crude facilities.
Brent crude, the global benchmark, dropped as much as 5.3% to around $73 a barrel, marking its steepest fall since October of last year. Prices had been around $78 on Monday, before The Washington Post reported that Israeli Prime Minister Benjamin Netanyahu assured U.S. President Joe Biden that Israel would target military sites, not oil or nuclear facilities in Iran.
Additionally, the International Energy Agency (IEA) forecasted a global oil surplus early next year, revising down its projections for demand growth. The IEA noted a “sharp slowdown” in demand growth following the post-pandemic recovery, particularly as China’s economy continues to struggle.
The IEA also highlighted that spare capacity within the OPEC+ cartel of producers is near record highs.
ING analyst Ewa Manthey commented: “Oil prices took a significant hit this morning after Israel’s statement that it will refrain from targeting Iran’s oil infrastructure, removing a major concern for the oil market in the near term.”
