As Israel continued its airstrikes targeting only military facilities, excluding Iranian oil refineries, international oil prices plummeted. It appears that some of the supply concerns caused by geopolitical instability in the Middle East have been resolved.

On the 28th (local time) at the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil for December delivery closed at $67.83 per barrel, down 6.13% from the previous trading day. December Brent crude oil, a global benchmark, closed at $71.42 on the ICE Futures Exchange, down 6.09% from the previous day. All are at the lowest level this month. The daily drop was the largest in more than two years since July 12, 2022, when oil prices fell nearly 8% in one day.

It is analyzed that concerns over crude oil supply have decreased as Israel’s retaliatory airstrikes last weekend (26th) avoided Iranian oil facilities. In the early morning of the 26th, the Israeli Defense Forces (IDF) mobilized F-15 and F-16 fighter jets and bombed military facilities in three provinces, including Iran’s capital Tehran, Khuzestan, and Ilam, destroying three Russian-made S-300 surface-to-air missile batteries. .

Iran also responded cautiously to the Israeli airstrikes. Iran’s Supreme Leader Ayatollah Ali Khamenei did not mention retaliation against Israel on the 27th, saying, “Israel’s attack the day before should not be exaggerated, but it should not be downplayed either.”

As concerns over the spread of electricity are decreasing, the market is again focusing on demand rather than supply. “Oil prices have moved in response to the perception that hostilities between Israel and Iran have been contained,” said Bill Farren-Price, a senior research fellow at the Oxford Institute for Energy Research. “That doesn’t mean the war won’t escalate, but the macro forces that have kept oil prices from falling so far “We have regained control,” he told the Financial Times (FT). This means that macroeconomic factors, such as slowing demand in China, can affect oil prices again.

According to Reuters, Citigroup analyst Max Layton lowered the target price for Brent crude oil from $74 to $70 per barrel, reflecting the lower risk premium. Investment bank Tudor Pickering Holt & Co. estimated that the base scenario for WTI next year is around $65 per barrel. Phil Flynn, senior analyst at Price Futures Group, said, “Today’s sharp drop is a perfect example of news moving the market,” but added, “There are still many geopolitical risks remaining.”

Reporter Han Kyung-kyung