Oil Prices Hit Two-Month Lows as US Midterm Results Boost Iran Deal Hopes

Crude oil prices extended their recent losses on Wednesday, November 4, falling by more than 8% to their lowest levels in over two months. The sharp decline followed the US midterm election results, which strengthened expectations that Washington could seek a diplomatic resolution to its conflict with Iran.

Brent crude settled at $94.62/bbl, down $8.98 or 8.7%, while West Texas Intermediate (WTI) dropped $7.97 or 8.3% to $88.12/bbl. Both benchmarks recorded their lowest closing levels since August 31.

Political Changes Strengthen De-Escalation Expectations

US President Donald Trump’s Republican Party lost control of both the House of Representatives and the Senate, prompting investors to reassess the possibility of further American military action against Iran.

With Democrats gaining control of Congress, Trump could face greater restrictions on military spending and operations in the Middle East. This may increase the administration’s incentive to pursue negotiations rather than intensify the conflict. Trump’s comments that Washington had no immediate plans to strike Iran further supported expectations of reduced geopolitical tensions.

However, the prospect of a quick settlement remained uncertain. Gulf analysts warned that an agreement viewed as a political victory for Iran and a setback for Trump could potentially lead to further escalation.

Iran’s Supreme Leader Mojtaba Khamenei maintained that US hostility would continue regardless of which party controlled Congress. A senior Iranian official also indicated that Washington and Tehran remained far from reaching an agreement. Meanwhile, Qatar stepped up mediation efforts to prevent a renewed outbreak of hostilities.

Middle Eastern Supply Disruptions Remain a Concern

Despite easing market sentiment, geopolitical risks continued to threaten regional energy flows. According to Vortexa data, Gulf exports of crude oil, condensate and refined products averaged 17.1 million bbl/day in October, down from 18.9 million bbl/day in September. Export volumes remained at approximately three-quarters of their pre-war levels.

The UAE was reportedly considering the construction of a third oil pipeline to bypass the Strait of Hormuz, highlighting efforts to reduce dependence on the strategic shipping route.

Separately, Yemen’s Houthis claimed responsibility for targeting King Khalid International Airport in Riyadh, although Saudi authorities had not confirmed the reported incident.

US Crude Inventory Decline Offers Limited Support

The US Energy Information Administration (EIA) reported that crude oil inventories decreased by 865,000 barrels to 409.8 million barrels during the week ended October 30. The decline contrasted with analysts’ expectations for an increase of 877,000 barrels.

Gasoline and distillate inventories also recorded decreases during the same period.

Despite the supportive inventory data, the market’s primary focus remained on changing geopolitical expectations. Growing optimism over a possible resolution to the Iran conflict outweighed concerns over supply disruptions and declining US stockpiles, driving the sharp losses in crude oil futures.

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