Tel Aviv, Israel – In a significant development two days ago, benchmark crude oil futures experienced a drastic drop, marking the largest one-day decline in over two years. The drop came after Israel carried out limited retaliatory attacks on Iran, focusing mainly on air defense systems and missile production sites in three Iranian provinces. The attacks steered clear of energy facilities, alleviating concerns of potential disruptions to global oil supplies.
Analysts have noted that while energy infrastructure was not directly targeted in the recent Israeli strikes on Iran, the country’s oil and gas facilities did not emerge unscathed. Israel’s precision air and drone strikes primarily aimed at air defense systems protecting key oil and gas installations, as well as military sites linked to Tehran’s nuclear program and ballistic missile production. Some of the targeted installations included the Abadan oil refinery, the Bandar Imam Khomeini petrochemical complex, the gasfield Tange Bijar, and the Bandar port. These strikes have raised concerns about the vulnerability of Iran’s energy infrastructure to future attacks.
Despite the attacks on crucial oil and gas facilities in Iran, oil prices have partially rebounded from the heavy losses seen earlier in the week. Brent crude for December delivery rose by 2.1% to reach $72.50 per barrel, while the corresponding WTI crude contract increased by 2.0% to trade at $68.62 per barrel. The uptick in oil prices follows a report by the U.S. Energy Information Administration indicating inventory draws in gasoline and middle distillates for the week ending October 25.
Furthermore, global oil demand hit a record high of 103.79 million barrels per day in August, surpassing expectations by about 450 thousand barrels per day. This increase in demand, especially notable in countries like Korea, Italy, Saudi Arabia, Turkey, and Spain, has prompted Standard Chartered to revise its 2024 global demand growth estimate upwards.
In Europe, gas prices have experienced an unexpected rally due to recent supply disruptions in Norway and the U.S. This trend, combined with concerns about security in the Middle East and Russian gas flows, has led to a sharp increase in European gas prices. Front-month TTF prices reached a 10-month high, settling at EUR 42.519/MWh on October 28. StanChart highlights that the year-to-date increase in EU and UK gas prices now exceeds 30%, closely following the performance of gold in the same period.