(Bloomberg) -- Oil extended losses in late trading on easing concerns over tensions in the Middle East.
The Washington Post reported that Israeli Prime Minister Benjamin Netanyahu told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran. West Texas Intermediate fell about 5% in post-settlement trade.
“The reaction by the market is likely taking off or tapering the geopolitical risk premium on oil for now,” said Rohan Reddy, head of international business development & corporate strategy at Global X Management.
Crude prices have been on a roller coaster in recent weeks as traders tracked the outlook for escalating conflict in the Middle East. WTI has risen around 8% this month as the geopolitical situation threatens output from a region that supplies about a third of the world’s oil.
Iran has been pumping about 3.3 million barrels a day in recent months, making it the third-largest oil producer in the Organization of Petroleum Exporting Countries.
Prices earlier on Monday declined after China’s highly anticipated Finance Ministry briefing on Saturday lacked specific new incentives to boost consumption in the world’s biggest crude importer.
Despite Beijing’s promises of more support for the struggling property sector and hints of greater government borrowing, the briefing didn’t produce the headline dollar figure for fresh fiscal stimulus that the markets had sought. Data showed export growth unexpectedly slowed, curbing a trade rebound that had been a bright spot in a weakening economy.
“The non-event of specifics from Chinese officials about a new stimulus package places another dent in crude demand,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.
Adding to the gloom, OPEC joined a chorus of others projecting weakening demand growth. The group trimmed its forecasts this year and next for a third consecutive month.
In the options market, traders had been bracing for Israel’s response to Iran’s Oct. 1 ballistic missile attack. For WTI, calls were at the widest premium to puts since 2022, when Russia invaded Ukraine. Weekly volumes for Brent options were the second-highest on record last week, having hit a weekly record the previous week.
“The market look worse to me in terms of fundamentals but remains held hostage by geopolitics and is likely to stay that way,” said Scott Shelton, an energy specialist at TP ICAP Group Plc.
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--With assistance from Weilun Soon and Alex Longley.
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