WTI Suffers Biggest Daily Loss In Two Years As Concerns Shift From Israel To Oversupply

But one analyst thinks the bearish sentiment isn't justified: File Image/Pixabay

Oil prices plummeted a whopping 6 percent on Monday, driven by Israel attacking Iran's military rather than oil and nuclear infrastructure, and as one analyst argued that the bearish sentiment gripping the investment community isn't justified.

Brent settled down $4.63, or 6.09 percent, at $71.42 per barrel, while West Texas Intermediate settled down $4.40, or 6.13 percent, at $67.38.

It was the biggest daily loss for WTI since July 12, 2022, when the benchmark shed 7.93 percent.

Citi on Monday cut its Brent forecast by $4 to $70 per barrel over the next three months, and the bank's analysts stated in a note that "The recent Israel military action is unlikely to be seen by the market as leading to an escalation that impacts oil supply."

Also influencing Monday's trading was the impending U.S. elections: Subadra Rajappa, head of U.S. rates strategy at Societe Generale, remarked, "It's the calm before the storm; a lot of investors are a little bit more cautious heading into the elections."

Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, said he expected a massive price drop in crude after the Israeli strike against Iran over the weekend but added that "the market today is just far too bearish; there's no reason to be panicking right now, what you're seeing today in the oil price is a financial flush-out and we'll get past this."

Nuttall also professed to being bullish on energy stocks and pointed out that a likely election of Donald Trump next week would add to his bullishness because Trump would impose harsher sanctions on Iranian oil exports, which in turn would cut into global supplies.

Associated Press disagreed, positing that, "The long-term expectation is for oil prices to move lower, not higher; that's because the balance between supply and demand has tilted toward supply, a dynamic that typically deflates oil prices."

AP fortified its stance by noting that the International Energy Agency said demand for oil in the first half of this year rose by the smallest amount since 2020, and that meanwhile, supplies have continued to increase.

In a similar vein, Andy Lipow, president of Lipow Oil Associates, forecast that "Oil prices will remain under pressure for the rest of this year, it may be difficult to see Brent crude oil prices reaching $80 in the foreseeable future" as concerns shift from geopolitical tensions to "an oversupplied market."