Brent oil price benchmark set for biggest weekly drop since 2020

HOUSTON: Oil prices were set for a sharp weekly fall after the election losses of US President Donald Trump’s Republican Party raised hopes of a de-escalation in the US-Israeli war on Iran, though attacks on vessels in the Middle East continue to provide a floor to crude.

In a see-saw session on Friday, Brent crude futures for January were down 45 cents, or 0.46 percent, at USD97.84 a barrel by 10:34 a.m. CDT (1637 GMT). US West Texas Intermediate futures edged up 15 cents, or 0.17 percent to USD90.67.

The Brent contract is on track for a 17 percent decline this week, which would be its steepest weekly percentage fall since the start of the COVID-19 pandemic and its biggest in absolute terms going on LSEG data back to 1988.

WTI is set for a 13 percent decline.

“A bit of unwinding of the war premium seems to be what’s going on,” said Phil Flynn, senior analyst with Price Futures Group.

While the US midterms’ results raised hopes of a potential Iran war de-escalation and more crude exports out of the region, they also raised expectations of tighter US regulations for the AI industry, prompting a dramatic rout in technology stocks on Thursday.

In oil markets, signs of an emerging supply excess amid demand destruction were reinforced by spot premiums for Middle Eastern crude benchmarks returning to levels reached before the conflict.

“The crude market is loosening to a state of oversupply based on the balance, but the quality difference still exists as refiners recover what they can take versus what is available,“ said Rystad oil market analyst Janiv Shah, pointing to longer shipping routes and the need for ship-to-ship transfers as workarounds near the Strait of Hormuz.

“The market is still looking for evidence of a firm deal being signed (on Iran), or any backlash from either party could tighten fundamentals once more.”

Oil prices fell 8 percent on Wednesday alone after the Democrats swept the US midterm elections, settling at two-month lows.

However, prices rebounded on a surge in tanker attacks in the Gulf and the Strait of Hormuz, renewing concerns over supply flows from the region.

A Greek ship manager said on Friday that a seafarer was killed in a November 5 explosion on an oil products tanker in the Gulf, believed to have been caused by a missile attack.

Data from Britain’s maritime security agency UKMTO suggested that attacks on oil-carrying ships are still running at close to a record pace.

“Oil doesn’t have to be at USD117 to be expensive, and a fall to USD93 doesn’t mean the underlying problems have disappeared,” said Matt Stanley from tanker trackers and energy flow analysts Kpler.

“After over 25 years in this business, I honestly can’t recall many weeks quite like this one.”