Oil prices rose on Thursday after a steep drop in the previous session, as investors weighed what the US midterm results mean for the Iran war. Analysts cite unresolved questions around the war, including concerns about possible escalation, even as supply through the Strait of Hormuz recovers.
Brent crude futures rose on Thursday as investors weighed the future course of the US-Israeli war with Iran. The move followed heavy losses for President Donald Trump's Republican Party in midterm elections this week.
Brent futures were up $2.19, or 2.3%, at $96.81 a barrel as of 1255 GMT, while US West Texas Intermediate crude futures rose $1.32, or 1.5%, to $89.44. Both prices had tumbled by more than 8% in the previous session to settle at their lowest since August 31.
Sparta sees more volatility ahead
The conflict with Iran, which Trump launched alongside Israel in February, and the resulting higher fuel prices for US consumers were major grievances for voters in Tuesday's rout of Republicans. Sparta Commodities senior oil analyst June Goh said markets are pricing in more likelihood for the war to end. However, she said there will be more volatility ahead because the path to full diplomacy is still wrought with many unknowns and global strategic reserves have drawn very thin.
UBS commodity analyst Giovanni Staunovo said the situation in the Middle East is still unresolved, which is why there is some modest recovery in prices. Citi said in a note there were concerns that, with the midterms over, the White House could focus on its executive powers in foreign policy and potentially escalate conflict with Iran.
Eurasia Group trims strike odds and deal odds
Eurasia Group lowered its estimate for the chance of renewed US strikes on Iran to 60% from 65%. It also cut the probability of a deal to 10% from 20% and raised the likelihood of a continued standoff to 30% from 15%. Escalation is likely to produce a sharper increase into a band of $110 to $125 per barrel for Brent, the firm said.
Supply recovers through Hormuz
Iran's Islamic Revolutionary Guard Corps said on Thursday that two oil tankers and a tugboat had caught fire in separate incidents after attempting to use unauthorised routes through the Strait of Hormuz. Even so, analysts say crude shipments through the waterway have recovered to close to pre-war levels, though at a higher cost.
JPMorgan said in a note that the resumption of Gulf supply has pushed the global oil market back into surplus. It estimates a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October. Meanwhile, US crude, gasoline and distillate inventories all fell last week as demand hit its highest in a year, the Energy Information Administration said.
Source: Reuters via Investing.com
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