Oil futures edged higher in quiet trading after a drop of more than 9% a day earlier. An analyst at XS.com links the decline to shifting expectations about Middle East conflict after the US midterm elections, and expects uncertainty to keep markets volatile.
Oil futures are rising nearly a quarter of a percentage point in quiet trading, near the lowest levels since early last September. Yesterday's declines exceeded 9% in both West Texas Intermediate and Brent crude, according to Samer Hasn, Senior Market Analyst at XS.com.
Hasn says the drop reflects a shift in expectations about the risk of renewed Middle East conflict and supply disruption, which the market had largely priced in before the midterm results. He notes that the broad Democratic expansion in Congress is viewed as a barrier that could prevent renewed military action abroad.
Trump's options on Iran
Experts and insiders view these developments from varied and sometimes widely divergent perspectives, and Hasn expects the uncertainty to leave the market facing possible waves of volatility over the coming days and weeks. Citing Axios, he says Trump must choose between reaching a deal with Iran and striking Iran again. A third option is keeping the naval and economic blockade in place, as his aides advise.
In Hasn's view, escalation or the status quo appear more likely, because a deal with concessions would put Trump in the position of the defeated. He adds that Trump keeps his current authority until the newly elected Congress begins its work next January. Citing US officials who spoke to Axios, he says the US military is finalizing preparations in the Middle East to resume combat operations against Iran.
Houthi advance adds supply risk
Hasn also points to the Houthis, who, according to the Wall Street Journal, have expanded their control in southern Yemen toward Aden. Talks to settle the conflict with Saudi Arabia have stalled, and sources told the Journal the Houthis demanded $51 billion in compensation from the Kingdom.
This may leave Saudi Arabia no option but to expand the war against the Houthis, Hasn says. The flare-up cost the energy market a substantial loss of supplies after September, following the shutdown of the East-West oil pipeline and the port of Yanbu, and he says the risk of such disruptions recurring remains.
Source: Investing.com
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