Trump's Election Calculus Caps Oil Price Fears

The oil price rally has been moderate since the US-Iran conflict resumed on July 8, unlike the sharp surge seen at the start of the war. Brent crude rose about 43% in the first three weeks after the war began on February 28, reaching $119.5 a barrel, around 65% above its pre-war level.

However, since the ceasefire ended, Brent has gained only about 24% over roughly three weeks. Prices climbed about 14% during the week beginning July 20, briefly topping $102 a barrel on Thursday before falling nearly 4% on Friday to trade below $97.

The more moderate price increase reflects the absence of physical supply disruptions and ample global inventories, according to analysts. The market also expects Trump's administration to prevent oil prices from rising too sharply ahead of the November midterm elections.

Homayoun Falakshahi, head of crude oil analysis at Kpler, said record volumes of crude held at sea following the reopening of the Strait of Hormuz in June and China's large crude inventories have provided a significant short-term buffer. Falakshahi also noted that expectations of Trump's administration preventing a sharp rise in oil prices ahead of the midterm elections are helping to curb speculative buying.

Aaron Kildow, Sparta's commodity owner for crude oil, said the Trump administration has few realistic tools to bring down gasoline prices before the midterm elections. The most effective way to lower oil prices would be to end the conflict and restore normal oil flows, Kildow added.