Brent Falls 16% for the Week on De-Escalation Bets and Supply Fears Near Hormuz
Key Facts
Brent crude fell 16% in the week before the November 9 report, its biggest weekly decline since the start of the COVID-19 pandemic, according to Reuters. The agency said crude touched $93.22 a barrel, its lowest level in two months. Oil extended its decline in Monday’s session as investors watched the course of U.S.-Iran negotiations. By 1427 GMT, Brent futures were down 5.2% at $93.27 a barrel, while West Texas Intermediate fell 4.5% to $86.71. Prices came under pressure after Trump signaled a lower likelihood of new attacks on Iran as long as talks continued, but reports of ships being attacked near the Strait of Hormuz kept supply concerns alive.
An analyst at Saxo Bank attributed oil’s continued decline to market bets on a U.S.-Iran peace deal, rather than concrete signs of progress in the talks. He said, "Oil continues to trade lower on hopes for a U.S.-Iran peace deal, not on concrete signs of progress." Trump’s remarks added to the pressure on prices, while ship traffic near the Strait of Hormuz remained a concern after reports of vessels being targeted in or near the area. Trump said Sunday it was "highly unlikely" he would order new attacks on Iran as long as negotiations to end the conflict were progressing. The contrast between de-escalation bets and shipping risks underscores the market’s sensitivity to any political or security developments affecting supply.
The Associated Press reported that Brent fell 4.1% to $94.27 a barrel in Monday trading, after starting the month above $112. This price differs from Reuters’ later reading during the session, which put Brent at $93.27 by 1427 GMT. The agency linked the decline since the start of the month to uncertainty over developments in the war with Iran. It also tied the post-election drop in oil-company shares to expectations that Democrats would push to end the U.S.-Iran war, potentially lowering energy prices and cutting those companies’ profits. Democrats gained full control of Congress in the midterm election results, according to the Associated Press, adding a political factor to investors’ assessment of the course of the war and energy markets.
Democrats are expected to use their control of House energy committees to investigate the administration’s policies, including oil arrangements with Venezuela and fuel prices during the conflict with Iran, according to S&P Global Energy. But major legislation faces hurdles without bipartisan support: overcoming a Senate legislative filibuster requires 60 votes, and the president has veto power. On the U.S. economy, employers added 165,000 jobs in October, beating economists’ expectations of 65,000, and the unemployment rate fell to 4.1%, according to the Associated Press. Labor Department revisions added a combined 84,000 jobs to the August and September totals, while average hourly earnings rose 0.4% in October from September, the biggest monthly increase since January. Markets are awaiting October’s Consumer Price Index data, due on November 10 at 08:30 a.m., with economists expecting annual inflation to rise to 3.9% from 3.7% in September.
The jobs breakdown showed professional and business services added 70,000 positions in October, while healthcare companies hired about 42,000 and factories added 19,000 jobs. By contrast, hotels, restaurants and bars cut 10,600 jobs during the month. The figures follow stronger-than-expected hiring growth, as attention turns to the next inflation reading. According to the Bureau of Labor Statistics calendar, October data are due as scheduled on November 10 at 08:30 a.m. Alongside developments in negotiations and shipping risks in the Strait of Hormuz, the data are among the near-term milestones markets are watching after oil’s sharp decline.