Oil prices are poised for a significant weekly decline following the U.S. midterm elections, which have raised expectations of a potential de-escalation in the U.S.-Israeli conflict with Iran. Despite ongoing attacks on vessels in the Middle East, the market is reacting to the political shift, with Brent crude futures for January dropping 74 US cents, or 0.8%, to US$97.55 a barrel by 3:26 a.m. ET. Similarly, U.S. West Texas Intermediate futures fell 73 US cents, or 0.8%, to US$89.79.
The Brent contract is on track for a 16% weekly decline, marking its steepest percentage fall since the start of the COVID-19 pandemic and the largest in absolute terms since 1988, according to LSEG data. WTI is set for a more than 13% decline. This drop comes amid a broader rout in technology stocks and growing signs of a crude oil glut, as spot premiums for Middle Eastern crude benchmarks return to pre-conflict levels.
Oil prices plummeted 8% on Wednesday after the Democrats made significant gains in the midterm elections, settling at two-month lows. However, prices rebounded slightly following a surge in tanker attacks in the Gulf and the Strait of Hormuz, which renewed concerns over supply disruptions. Data from Britain’s maritime security agency UKMTO indicates that attacks on oil-carrying ships remain near record levels.