Oil Falls Over 13% in a Week as Hopes for Mideast Talks Grow

what happened

Oil prices recorded double-digit weekly losses after the Republican Party lost ground in the US midterm elections. Brent for January delivery settled at $98.32 a barrel, almost flat on Thursday but down 13% for the week. WTI gained 0.3% to $90.83, though it still ended the week 13% lower.

According to Dow Jones Newswires, the market began pricing in a negotiated end to the Iran conflict after Democrats took control of Congress and Trump acknowledged the war had hurt his party. Macquarie strategist Walt Chancellor called the move a reversal of the risk premium built up in September and October. Some analysts think the sell-off went too far, since attacks on Hormuz shipping and Houthi threats to the Saudi Red Sea route remain.

Gulf producers meanwhile are offering steep discounts. Saudi Aramco cut its December official price for Arab Light to Asia by $2, to a $7 discount against Oman/Dubai. J.P. Morgan expects a surplus of 1.1 million barrels a day in September, rising to 1.4 million in October, and estimates demand is down 3.3 million barrels daily since the conflict started in late February.

why it matters

For oil traders, the drop signals a shrinking geopolitical premium and a market moving back into surplus. A diplomatic route would bring short-term relief, but distrust and slow talks could leave any outcome inconclusive, analysts say.

market impact

Crude oil (Brent, WTI): fading Iran risk premium pressures prices.

• ▼Brent pressure down — hopes for diplomacy with Iran shrink the geopolitical risk premium
• ▼WTI pressure down — the fading war premium and a return to supply surplus weigh on prices

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