Oil prices are expected to fall when markets reopen for trading on Monday (October 28), analysts said.
The forecast comes amid concerns that supply risks have narrowed, after Israel's retaliatory strike on Iran on October 26 spared Tehran's oil and nuclear infrastructure and did not disrupt energy supplies.
Last week, Brent North Sea crude and U.S. West Texas Intermediate (WTI) crude prices rose 4% on volatile trading, as markets worried about supply risks related to Israel’s response to Iran’s missile attack on October 1 and political uncertainty surrounding the U.S. election in November 2024.
Despite the escalating tensions in the Middle East - a major source of global oil supplies - "the market can breathe a sigh of relief" as wells are kept safe, said Harry Tchilinguirian, head of research at Onyx. However, he added: "What is unclear is whether this is Israel's final retaliation against Iran."
"Israel did not attack oil infrastructure and reports suggest Iran will not retaliate. That removes a destabilizing factor for the oil market," said Tony Sycamore, a market analyst at IG bank in Sydney, Australia.
While most analysts agree that oil prices will fall when the market reopens on the morning of October 28, there is a possibility that there will be “rumors” aimed at pushing oil prices up. WTI oil prices could hover around $70 a barrel, according to Sycamore. Meanwhile, Tchilinguirian believes that geopolitical risk premiums have been built into oil prices for months and Brent oil prices will return to $74-$75 a barrel.
UBS commodities analyst Giovanni Staunovo also expects oil prices to fall this week as Israel’s response to the Iranian attack appears to have been restrained. However, he noted that the decline may be temporary and there are still geopolitical risks waiting to weigh on oil prices.
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