File photo showing an oil tanker pass through the Suez Canal, Egypt.
Peter Bischoff | Pb Archive | Getty Images
Crude oil futures fell for a fourth day Thursday, as Israel has refrained from immediately striking back against Iran after the unprecedented air assault last weekend, easing fears that the Middle East is on the brink of a major war.
The West Texas Intermediate contract for May fell 36 cents, or 0.42%, to $82.34 a barrel. June Brent futures lost 52 cents, or 0.6%, to $86.77 a barrel. Oil has sold off 4% this week as traders unwind the geopolitical risk premium built into prices over the last two weeks.
U.S. crude oil and the global benchmark have fallen below the prices reached after Israeli’s airstrike against Iran’s diplomatic compound in Damascus, Syria at the start of the month, the event that triggered the current round of hostilities.
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Tamas Varga, analyst with oil broker PVM, said it appears international pressure on Israel will compel the country to respond in a “measured and moderate” way to Iran’s weekend attack. Ukraine’s drone attacks on Russian oil infrastructure have also receded, Varga said.
“Those with bullish propensity are sinking into apathy as the risk premium that is rooted from Russia and the Near East keeps eroding,” the analyst said in a note Thursday.
The Biden administration has imposed new sanctions against Iran’s missile and drone program, but the punitive measures have spared the Islamic Republic’s oil exports for now. Treasury Secretary Janet Yellen said Tuesday that the U.S. could target Iranian oil in response to the attack against Israel.
In addition to the fading geopolitical risk premium, prices are also falling on a 10 million barrel build in U.S. petroleum inventories last week, said Giovanni Staunovo, strategist with UBS.
