WTI oil prices drop below $67 amid reassessment of middle east risks
WTI oil prices drop below $67 amid reassessment of middle east risks
On October 29, oil prices continued to fall, adding another 1% to Monday's losses of more than 4%. At the time of writing, WTI was trading above $67 per barrel.
This price level is the lowest since the beginning of October, as market participants reassessed the risks of escalating armed conflict in the Middle East and potential disruptions in the oil sector.
'Israel's retaliatory strike on Iran over the weekend appears to be interpreted by the market as defensive, as only military targets, such as missile launchers, were hit. Iranian oil and nuclear facilities were unaffected, and Iran reported only minor damage over the weekend,' notes Commerzbank analyst Carsten Fritsch.
Current prices are reasonable
According to the expert, the oil market is currently well-supplied, with a supply surplus expected next year. Therefore, current WTI and Brent crude prices (the latter trading around $70) seem reasonable.
This has led to a significant reduction in the risk premium, provided, of course, that Iran does not respond to Israel's strike.
And since a new escalation in the Middle East cannot be ruled out, the price reaction to recent events may be exaggerated.
However, any hint of escalating tensions in the Middle East or around Iran could push prices back up to the strong technical level above $75.00, where the 100-day simple moving average (SMA) and several other key indicators converge.
