WTI Set for Weekly Loss of More Than 13% as Hopes for War De-escalation Fade
Key Facts
West Texas Intermediate futures fell 73 cents, or 0.8%, to $89.79 a barrel at 08:26 GMT on November 6, after early gains in a volatile session. The contract was heading for a weekly loss of more than 13%, while Brent was on track for a 16% weekly decline, its biggest relative weekly drop since the start of the Covid-19 pandemic. Reuters, via StreetInsider, linked the move to expectations of a de-escalation in the U.S.-Israeli war with Iran after Republican losses in the midterm elections. De-escalation could allow crude exports from the Middle East to increase, adding to pressure on prices. But ongoing attacks on ships in the region continued to support the market and limit the impact of expectations for abundant supply.
The week's losses followed an 8% drop in oil on Wednesday, November 4, when prices closed at their lowest levels in two months after Democrats won the midterm elections. Axios said prices fell by about $8 a barrel that day and that a post by Vice President JD Vance deepened the move. The outlet quoted an analyst saying the market interpreted the developments as raising the possibility that President Donald Trump would choose de-escalation over escalating the confrontation with Iran. Democrats won control of both the House and Senate in Tuesday's elections, according to AP, which described the result as a decisive rebuke of Republican rule in Washington. The outlet said voters had shown dissatisfaction with high prices, the war with Iran and government corruption.
The easing of geopolitical concerns was not enough to end volatility, as prices rebounded amid increased attacks on tankers in the Gulf and Strait of Hormuz and renewed concern about supply flows from the region. Reuters said data from the UK Maritime Trade Operations agency indicated that attacks on oil transport vessels remained near record levels. These risks kept the possibility of supply disruptions in play as traders priced in the prospect of more crude returning to markets. In another sign that the price path was not one-way, Brent closed up 3.9% on Thursday, November 5, at $98.29 a barrel, recovering part of its nearly 9% loss in the previous session. The rebound came before the WTI reading recorded on Friday morning, while futures remained on track for steep weekly losses.
Expectations for increased Middle East exports coincided with signs of a developing supply surplus, according to Reuters, which said spot premiums for Middle Eastern crude grades had returned to pre-conflict levels. This could point to less intense competition for spot cargoes than during the conflict, at a time when de-escalation could increase the volume of crude available from the region. But tanker attacks are limiting expectations that the geopolitical risk premium will quickly disappear. The continued forecast of a 16% weekly drop in Brent, compared with more than 13% for WTI, also reflects the scale of expected losses despite rebounds in some sessions. A Raymond James analyst said it remained unclear whether Vance's remarks signaled a more conciliatory stance toward Iran, and that a sustained price decline would require a "permanent exit path" from the war.