(Bloomberg) -- Oil plunged as a report that Israel may avoid targeting Iran’s crude infrastructure eased concerns about a potential supply disruption, bringing traders’ focus back to expectations of a sizable glut early next year.
West Texas Intermediate fell more than 4% to settle below $71 a barrel while Brent slid to around $74 a barrel. Earlier in the day, WTI plunged as much as 5.6% to trade below $70 a barrel. Prices pared some losses after China’s housing and finance ministries announced plans to hold a joint briefing with the country’s central bank on Thursday.
The Washington Post reported that Israeli Prime Minister Benjamin Netanyahu told the Biden administration he’s willing to strike military targets rather than oil or nuclear facilities in Iran. Israel later said it was weighing US warnings against striking Iran’s energy sites, but will act based on its own assessments.
While the conflict poses a danger to the region’s energy infrastructure, the oil market will face a glut in early 2025, the International Energy Agency said Tuesday. The agency made small cuts to its demand growth forecasts and said spare capacity from OPEC+ nations is near record levels.
Crude prices have been on a roller coaster in recent weeks as traders track the escalating conflict in the Middle East — home to about a third of global supply — after Israel vowed significant retaliation to an Oct. 1 missile barrage from Iran. The flare-up had overshadowed concerns about slowing growth in key markets, including China.
The latest sign that Israel will avoid targeting Iran’s oil infrastructure “has removed a big overhang for the oil market in the immediate term,” ING analysts Ewa Manthey and Warren Patterson wrote in a note.
Brent declined 2% on Monday after China’s highly anticipated Finance Ministry briefing over the weekend lacked specific new incentives to boost consumption in the world’s biggest crude importer. The new briefing on Thursday may provide more details of measures to support China’s slumping property sector and bolster economic growth.
Adding to the gloom, OPEC joined a chorus of others projecting weakening demand growth, trimming its forecasts for this year and next for a third consecutive month.
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