Oil Prices Head for 12% Weekly Loss Despite Fresh Tanker Attacks

Crude oil prices were on course for a sharp weekly drop, with both Brent crude and WTI shedding 12% since Monday, following the results of the U.S. midterm elections, which gave rise to hopes that the war in the Middle East could be brought to a swift end.

At the time of writing, Brent crude was trading at $99.42 per barrel, and West Texas Intermediate was trading at $91.242 per barrel, both up from Thursday’s close on reports of fresh tanker attacks in the Strait of Hormuz.

Reuters reported at least five vessel incidents in the Persian Gulf since Sunday, with threats to commercial traffic persisting despite a recovery in crude shipments through the Strait of Hormuz. The attacks, and skepticism about the prospects of peace between the United States and Iran, despite the Democrats’ victory in the midterms, put a floor under prices.

“In the absence of escalation, the oil market is likely to continue to slowly give back the risk premium it built in recent months, with oil flows from the Persian Gulf holding up well,” ING commodity analysts wrote in a note on Thursday. However, the absence of escalation remains only one of two options for President Trump. The other is, indeed, escalation, which would keep prices elevated.

“Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines,” KCM Trade’s chief analyst Tim Waterer said, as quoted by Reuters.

Meanwhile, FXPro’s senior market analyst Alex Kuptsikevich noted that “The Republicans’ defeat in the elections does not mean that the conflict in the Middle East will not escalate”, pointing to 2006 and the Iraq war, when Congress also came under the control of Democrats, but this did not change U.S. actions in the Middle East under President George W. Bush.

By Irina Slav for Oilprice.com