Oil Prices Drop Amid Eased Supply Concerns After Israels Statement

Highlights:

• Oil prices plunge: West Texas Intermediate (WTI) crude fell over 4%, closing below $71 per barrel, as concerns about potential supply disruptions eased.
• Israel's assurance: Israeli Prime Minister Netanyahu assured the US that military strikes would avoid Iran's oil infrastructure, reducing fears of major oil supply interruptions.
• Potential 2025 oil glut: The International Energy Agency (IEA) forecasts a supply surplus in early 2025, with OPEC+ nations holding near-record levels of spare capacity.

Israel to Avoid Targeting Iranian Oil Assets Oil prices took a significant dip after reports surfaced that Israel may not target Iran’s crude infrastructure. The news eased concerns about disruptions in global oil supplies, shifting market attention to expectations of a potential supply surplus in early 2025.

West Texas Intermediate (WTI) crude fell over 4%, closing below $71 per barrel, while Brent crude dropped to approximately $74 per barrel. Earlier in the session, WTI had plunged as much as 5.6%, briefly trading below $70 per barrel. At the time of writing, prices remained lower but had regained some ground following announcements from China's housing and finance ministries regarding a joint briefing with the central bank.

Netanyahu’s Assurance to the US According to a report from The Washington Post, Israeli Prime Minister Benjamin Netanyahu assured the Biden administration that military strikes would be aimed at targets other than Iran’s oil and nuclear facilities. Israel, however, stated that it would continue to assess its actions based on its own intelligence, despite the US warnings.

Potential Oil Glut in 2025 Despite the regional tensions, the International Energy Agency (IEA) has projected a potential oil glut by early 2025. The IEA slightly adjusted its demand growth forecasts and noted that OPEC+ nations have near-record levels of spare capacity, suggesting the market may remain well-supplied even in the face of geopolitical risks.

As global markets remain volatile, oil traders continue to monitor developments in the Middle East while assessing the impact of anticipated oversupply in the coming year.

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