Oil prices recovered on Thursday following losses of more than 8% in the previous session, as investors assessed whether the Democratic Party’s victory in the US midterm elections could increase pressure on President Donald Trump to pursue a negotiated settlement with Iran.
At 04:21 ET (09:21 GMT), Brent crude futures rose 0.9% to $95.56 per barrel, while US West Texas Intermediate (WTI) crude futures gained 0.2% to $88.31 per barrel.
The recovery followed Wednesday’s decline, when both benchmarks reached their lowest closing levels since 31 August. Market participants continued to monitor political developments in Washington, the conflict in the Middle East and the latest US petroleum inventory figures.
Brent and WTI Recover Following Wednesday’s Losses
Brent crude futures settled at $94.62 per barrel on Wednesday, falling $8.98, or 8.7%.
WTI crude closed at $88.12 per barrel, a decline of $7.97, equivalent to 8.3%.
Both contracts recorded their lowest settlements since 31 August.
Thursday’s increase brought Brent back above $95 per barrel, although prices remained below the levels recorded before Wednesday’s decline.
The movements reflected changing market expectations concerning the conflict with Iran and its potential implications for international oil supplies.
US Midterm Elections Influence Expectations for Iran Negotiations
The Democratic Party secured control of both the House of Representatives and the Senate in the US midterm elections.
The results prompted speculation that a Democratic-controlled Congress could seek to restrict funding for military operations and encourage the Trump administration to negotiate an end to the conflict with Iran.
Trump acknowledged that the war had contributed to the Republican Party’s electoral defeat.
Vice President JD Vance also questioned the political and economic costs of the conflict.
Investors considered whether the election results could increase the likelihood of reduced hostilities and a diplomatic settlement.
A change in the outlook for the conflict could affect the geopolitical risk premium reflected in crude oil prices.
Strait of Hormuz Remains a Focus for Energy Markets
The potential for diplomatic negotiations has drawn attention to the Strait of Hormuz, a major shipping route for global energy supplies.
Investors assessed whether an easing of tensions could eventually allow additional oil shipments to move through the waterway.
Changes in shipping conditions could influence the availability of crude oil in international markets.
Trump stated that the United States had no immediate plans to conduct further strikes against Iran.
However, US forces carried out limited strikes on Iran’s Qeshm Island earlier in the week, with Washington describing the operations as defensive.
The developments left uncertainty about the direction of the conflict and the outlook for regional energy transportation.
ING Analysts Assess Recent Oil Price Decline
Analysts at ING said that crude prices could gradually lose part of the geopolitical risk premium accumulated in recent months if military tensions do not intensify.
“In the absence of escalation, the oil market is likely to continue to slowly give back the risk premium it built in recent months, with oil flows from the Persian Gulf holding up well,” ING analysts said in a note.
The analysts also cautioned that the outcome of the conflict remained uncertain and questioned the extent of the recent decline.
“How all this plays out is still highly uncertain. Therefore, the degree and speed to which the oil market has sold off seems to be overdone,” they added.
Their assessment indicated that the outlook for crude prices remained dependent on political and military developments, including the continuity of oil shipments from the Persian Gulf.
US Crude Oil Inventories Decline Less Than Expected
Data published by the US Energy Information Administration (EIA) on Wednesday showed that domestic crude oil inventories fell by 865,000 barrels during the week ended 30 October.
Analysts had expected a larger decline of 1.7 million barrels.
The figures indicated that crude inventories decreased during the reporting period, although the reduction was smaller than anticipated.
The inventory report provided an additional indication of US petroleum supply conditions alongside the geopolitical developments influencing international prices.
Gasoline and Distillate Stocks Also Decrease
US gasoline inventories declined by 222,000 barrels during the same week, compared with market expectations for a modest increase.
Distillate inventories, which include diesel and heating oil, fell by 3.565 million barrels.
The reduction in distillate stocks was larger than the decline in crude oil inventories.
The figures showed decreases across all three reported petroleum categories, with the largest reduction recorded in distillates.
Oil Market Outlook
Oil prices recovered modestly on Thursday as investors reassessed the outlook for the conflict with Iran following the US midterm elections.
Expectations of possible diplomatic negotiations contributed to the movement in crude prices, although uncertainty remained over military developments and oil shipments through the Strait of Hormuz.
ING analysts indicated that some of the geopolitical risk premium could diminish if tensions ease, while also questioning the pace of Wednesday’s decline.
Meanwhile, US inventory data showed reductions in crude oil, gasoline and distillate stocks during the week ended 30 October.
