Oil falls for a fourth day as US election results ease Iran war fears

Oil prices fell for a fourth straight day on Thursday. Traders are betting that the Republicans' bad night in the US midterms will make a bigger war with Iran less likely.

What happened?

Brent crude futures lost 80 cents, or 0.85%, to $93.82 a barrel by 04:26 GMT. US West Texas Intermediate dropped $1.20, or 1.36%, to $86.92.

Both benchmarks had already tumbled more than 8% in the previous session. That took them to their lowest levels since 31 August.

Two sources familiar with Gulf government thinking said on Wednesday that President Donald Trump now has more reason to seek a deal. With Congress likely to be controlled by Democrats, who could limit his military options, a large-scale attack on Iran looks less probable, they said.

Why does it matter?

A settlement could bring back oil flows from Middle East regions hit by the war. Shipments through the Strait of Hormuz, the key route for most Gulf oil, are already back close to pre-war levels, analysts say, though at higher cost.

JPMorgan said the return of Gulf supply has pushed the global market back into surplus. It estimates 1.1 million barrels a day in September and 1.4 million in October, close to last year's average of 1.3 million.

Still, analysts warn the picture is murky. Sparta Commodities' senior oil analyst June Goh said markets are pricing in a higher chance of the war ending, but more volatility is likely. Global strategic stocks have also fallen sharply.

XAnalysts CEO Mukesh Sahdev added that commercial oil stocks in big consuming economies are near 15-year lows. He warned the US election result could harden Iran's stance.

What's next?

The new Democratic-majority Congress takes office in January. Citi warned that after the midterms the White House might lean on its executive powers in foreign policy, which could open the door to fresh escalation.

Eurasia Group cut its odds of renewed US strikes on Iran to 60% from 65%. It also cut the chance of a deal to 10% from 20%, and raised the chance of an unresolved standoff to 30% from 15%.

It warned that any escalation could push Brent sharply higher, to between $110 and $125 a barrel.

Earlier on this story

On 3 November, Democrats made broad gains in the US midterms. That put Republicans on course to lose control of Congress and weakened Trump's position.