Crude oil slips below $94 as US-Iran war fears ease
What's the story
Oil prices have been on a downward trend for four consecutive days, with Brent crude futures dropping by 1.03% to $93.65 per barrel and US West Texas Intermediate crude futures falling by 1.29% to $86.98 per barrel on Thursday. The decline is largely attributed to the results of this week's Congressional elections in the United States, which analysts say could reduce the risk of an escalating conflict with Iran.
Political impact
Trump's military options limited by Democratic Congress's power
The recent election results have weakened President Donald Trump's position, giving the Democratic Congress more power to limit his military options.
This political shift could push Trump toward seeking a resolution to the ongoing conflict with Iran, sources close to Gulf government circles told Reuters.
They also said that a full-scale assault on Iran now seems less likely, which could potentially restore oil flows from the Middle East affected by this war.
Future prospects
Diplomatic resolution to Iran conflict still fraught with uncertainties
June Goh, a senior oil analyst at Sparta Commodities, said the market is weighing the implications of the midterm elections on Trump's future actions regarding the Iran war.
She added that while there's an increased likelihood of conflict resolution, more volatility is expected as full diplomacy remains fraught with uncertainties.
This comes as global strategic reserves are running thin due to prolonged disruptions in oil supply chains.
Supply restoration
Resumption of Gulf oil supply pushes market back into surplus
Analysts report that crude shipments through the Strait of Hormuz, a key transit route for Gulf oil supplies, have nearly returned to pre-war levels, albeit at a higher cost.
The resumption of Gulf supply has pushed the global oil market back into surplus after months of disruption due to war.
JPMorgan estimates this surplus was 1.1 million barrels per day in September and widened to 1.4 million bpd in October, nearly matching last year's average of 1.3 million bpd.
Market outlook
Geopolitical risks remain unpredictable, may impact future oil prices
Despite the current market conditions, Mukesh Sahdev, CEO of energy consultancy XAnalysts, believes that the sharp selloff in oil may be short-lived.
He said geopolitical risks remain unpredictable and noted that commercial oil inventories in major consuming countries are near their lowest levels in 15 years.
This could mean that Iran could emerge from the US election outcome with greater resolve, potentially impacting future oil prices.