Oil prices dropped for a fourth straight day on Thursday, as traders weighed the fallout from Republican losses in this week’s US Congressional elections. Investors hope the results could reduce the chance of further escalation in the US-Israeli war on Iran. Brent futures fell 97 cents, or 1.03%, to $93.65 a barrel as of 0211 GMT, while US West Texas Intermediate crude slipped $1.14, or 1.29%, to $86.98.
Trump’s weaker position raises hopes of a deal
Two sources close to Gulf government circles said on Wednesday that a weakened Trump, now facing a Democratic Congress that can limit his military options, has more reason to pursue a deal. They said a full-scale assault on Iran now looks less likely. A settlement could restore oil flows from the Middle East that have been affected by the war, although analysts warned that the path forward remains unclear.
June Goh, senior oil analyst at Sparta Commodities, said markets were pricing in a greater chance that the war would end. She added that volatility would likely continue, because the route to full diplomacy is still full of unknowns and global strategic reserves have fallen very low.
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Gulf supply recovery pushes market into surplus
Crude shipments through the Strait of Hormuz, the main waterway for most Gulf oil supplies, have recovered to near pre-war levels, according to analysts. However, they noted that the flows now cost more. JPMorgan said in a note on Wednesday that the return of Gulf supply has moved the global oil market back into surplus after months of disruption caused by the war.
The bank estimates the market returned to a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October. That figure nearly matches last year’s average of 1.3 million bpd.
Analysts doubt prices will stay low after vote
The sharp fall in oil may not last. Mukesh Sahdev, CEO of energy consultancy XAnalysts, was asked whether prices would likely remain lower after the election. His answer was blunt: “The short answer is no.”
Sahdev said geopolitical risks remain hard to predict. He pointed out that the incoming Congress will not take office until January, so US policy options have not changed immediately. He also said commercial oil inventories in major consuming countries are near their lowest level in 15 years, and that Iran could emerge from the US election with greater resolve.
The Energy Information Administration said on Wednesday that US crude, gasoline and distillate inventories all fell last week, as demand reached its highest level in a year.
