Oil prices fell sharply in early Asian trade on Monday, weighed by easing fears of a Middle East war after an Israeli strike against Iran, over the weekend, was less severe than feared.
The strike saw traders price out a risk premium from crude prices, and put focus back squarely on demand, which is expected to weaken in the coming months.
Brent Oil Futures expiring in December fell 4.1% to $72.97 a barrel, while West Texas Intermediate crude futures fell 4.2% to $68.76 a barrel by 19:5 7 ET (23:57 GMT). Both contracts were close to their weakest levels since early-October.
Israel strike against Iran avoids oil, nuclear sites
Israel launched a strike against several Iranian military sites on Saturday, but avoided the country’s major oil production and nuclear facilities.
Iran downplayed the impact of the attack, but still threatened retaliation.
The Israeli attack quelled concerns over a major escalation in the long-running Middle Eastern conflict. Traders had feared that any attacks on Iran’s oil and nuclear infrastructure would mark a dire escalation in the conflict, potentially disrupting oil supplies from the crude-rich region.
This notion had buoyed crude prices over the past month, especially after Iran attacked Israel at the beginning of October.
But despite Israel showing some restraint, the broader conflict in the Middle East still showed little sign of de escalation, as the country kept up its offensive against Hamas and Hezbollah.
Economic data barrage on tap this week
Beyond the Middle East conflict, focus this week is on a slew of key economic readings for more cues on global oil demand.
Gross domestic product data from the U.S. and the euro zone is due in the coming days, while PCE price index data- the Federal Reserve’s preferred inflation gauge- is also due later in the week.
Purchasing managers index data from China- the world’s biggest oil importer- is due later in the week, offering up more cues on the country after it unveiled a string of major stimulus measures over the past month.
