Oil heads for weekly decline, though supply concerns in the Middle East provide price support
Oil prices are set for a sharp weekly decline, driven by expectations that the intensity of the conflict with Iran may ease following the electoral defeat of Donald Trump’s party. Nevertheless, supply concerns stemming from conflicts in the Middle East continue to provide a floor, preventing further price drops.
As of GMT 05:04 on Friday, Brent crude for January delivery rose by $1.29 (1.31%) to $99.58 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude climbed 86 cents (0.95%) to $91.38 per barrel.
Both benchmarks have gained value for the second consecutive day; Brent crude even briefly surpassed the $100-per-barrel mark during morning trading.
Despite this, Brent crude is on track for a weekly decline of 12%, while WTI is heading for a drop of 12.1%—following the expiration of the December contracts on October 30.
Oil contracts saw significant losses earlier in the week, with prices falling by 8% on Wednesday to reach their lowest levels in two months.
This decline was influenced by the U.S. midterm elections held on Tuesday, which saw control of both the Senate and the House of Representatives shift from Trump’s Republican Party to the Democratic Party. This transition has fueled expectations that the intensity of the ongoing conflict—now in its ninth month—between the U.S./Israel and Iran could potentially diminish.
Prices climbed once again on Wednesday and Thursday, driven by an uptick in attacks on tankers in the Strait of Hormuz—a vital chokepoint through which the bulk of oil shipments from the Persian Gulf and the Middle East must pass. This development has reignited concerns regarding the continuity of supply from the region.
The rise observed on Friday can be characterized as a "technical rebound" following the sharp sell-off that occurred in the wake of the U.S. elections. The primary driver behind the price action is the realization that the underlying issue remains unresolved; the attacks in the Strait of Hormuz have persisted, unaffected by the Democrats' electoral victory.
Until a safer and more cost-effective alternative to the Gulf route is established, oil prices will likely find support during dips and remain highly sensitive to any news headlines that threaten to escalate tensions.
On Thursday, Iran reported that three additional tankers had been attacked in the Strait of Hormuz, while data from the British maritime security agency, UKMTO, indicated that assaults on oil-carrying vessels are continuing at a pace nearing record levels.
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