Summary
- Oil prices fell for a fourth consecutive session on Thursday as investors weighed the possibility that US President Donald Trump’s weakened political position following the midterm elections could reduce the chances of further escalation in the US-Israeli war against Iran.
- “Markets are assessing the impact of the midterm elections on Donald Trump’s next steps with the Iran war, pricing in a higher likelihood for the war to end,” said June Goh, senior oil analyst at Sparta Commodities.
- Citi warned in a note on Thursday that the end of the midterm elections could allow the White House to focus more heavily on its executive authority in foreign policy, potentially increasing the risk of renewed escalation with Iran.
Brent crude futures declined 80 cents, or 0.85%, to $93.82 a barrel by 0426 GMT. US West Texas Intermediate (WTI) crude fell $1.20, or 1.36%, to $86.92 a barrel.
Both benchmarks plunged more than 8% on Wednesday, settling at their lowest levels since August 31.
The Republican Party’s losses in the congressional elections could limit Trump’s military options and encourage his administration to pursue a diplomatic settlement with Iran, according to two sources familiar with Gulf government discussions. They said the prospect of a full-scale US assault on Iran now appeared less likely.
A potential end to the conflict could help restore oil supplies from the Middle East that the war disrupted. However, analysts warned that uncertainty over the next phase of the conflict continues to weigh on market expectations.
“Markets are assessing the impact of the midterm elections on Donald Trump’s next steps with the Iran war, pricing in a higher likelihood for the war to end,” said June Goh, senior oil analyst at Sparta Commodities.
Oil shipments through the Strait of Hormuz, a crucial route for Gulf energy exports, have recovered to levels close to those recorded before the war, although transportation costs remain elevated.
JPMorgan said the recovery in Gulf supplies had pushed the global oil market back into surplus after months of war-related disruptions.
According to the bank, the market recorded a surplus of 1.1 million barrels per day (bpd) in September, which increased to 1.4 million bpd in October. The October surplus nearly matched last year’s average of 1.3 million bpd.
Despite the easing supply concerns, analysts said uncertainty remained over Washington’s next moves before the Democratic-controlled Congress takes office in January.
Citi warned in a note on Thursday that the end of the midterm elections could allow the White House to focus more heavily on its executive authority in foreign policy, potentially increasing the risk of renewed escalation with Iran.
