SEATTLE (Oil Monster): Oil prices fell for a fourth consecutive session in early Thursday trading as investors increasingly priced in a lower risk of renewed escalation in the U.S.-Israeli war with Iran following the U.S. midterm elections.
Brent crude futures fell 97 cents, or 1.03%, to $93.65 a barrel at 0211 GMT, while U.S. West Texas Intermediate crude declined $1.14, or 1.29%, to $86.98.
Both benchmarks had fallen more than 8% in the previous session, settling at their lowest levels since August 31.
The selloff followed the U.S. midterm elections, where Democrats captured control of both chambers of Congress from President Donald Trump's Republican Party.
Two sources close to Gulf government circles told Reuters that a politically weakened Trump could have greater incentive to pursue a negotiated settlement with Iran and that a full-scale military assault appeared less likely.
"Markets are assessing the impact of the midterm elections to Donald Trump's next steps with the Iran war, pricing in more likelihood for the war to end," said June Goh, senior oil analyst at Sparta Commodities.
Analysts cautioned, however, that the diplomatic path remains uncertain and that geopolitical volatility could return quickly.
The latest decline reflects more than a political reaction. The market is simultaneously removing part of the Iran-war risk premium while physical supply conditions improve. Gulf exports have recovered sharply and JPMorgan estimates the global oil balance shifted to a 1.4 million bpd surplus in October. Together, those forces are putting pressure on prices even though geopolitical risks remain unresolved.
Crude shipments through the Strait of Hormuz have recovered close to pre-war levels, according to analysts cited by Reuters, although shipping costs remain elevated.
The improvement in Gulf supply has helped change the global market balance after months of disruption.
JPMorgan estimates the global oil market moved into a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October.
Also Read: Global Oil Surplus Widens as Gulf Exports Recover
Despite the broader supply recovery, U.S. crude oil, gasoline and distillate inventories all declined in the latest reporting week, according to the Energy Information Administration.
Reuters reported that U.S. petroleum demand reached its highest level in a year, providing some fundamental support to the market even as geopolitical risk premiums eased.
Mukesh Sahdev, CEO of energy consultancy XAnalysts, cautioned against assuming lower prices would persist.
He noted that geopolitical risks remain difficult to predict and that the incoming Democratic-controlled Congress will not take office until January, meaning U.S. policy options have not changed immediately.
Commercial oil inventories in major consuming countries also remain historically tight, which could limit the downside if geopolitical tensions intensify again.
The next key test is whether diplomatic efforts with Iran produce concrete progress and whether Gulf crude exports continue recovering without renewed shipping disruption.
Oil traders will also be watching whether the surplus identified by JPMorgan begins to show up more clearly in global inventory data.
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Courtesy: www.reuters.com
