Brent oil futures plunged 10 per cent to trade below $100 a barrel as investors wagered that a Democratic sweep in the US midterm elections could usher in a quicker end to the months-long Iran conflict that upended global energy markets.
As market participants processed the outcome of an election widely interpreted as a referendum on a domestically unpopular war and the cost of living, the global benchmark slumped to a two-month low of $93.22 a barrel during the session. West Texas Intermediate, meanwhile, plummeted below $90.
Traders Slash Bullish Holdings After Political Warnings
Following direct comments from Vice-JD Vance blaming the foreign conflict for Republican defeats, prices experienced another steep drop. Market participants adjusted their holdings to factor in an earlier-than-expected conclusion to hostilities, prompted by Senate Minority Leader Chuck Schumer promising to terminate the war and asserting that select Republicans would support the initiative.
Technical factors also amplified oil’s sell-off. Figures provided by Kpler’s Bridgeton Research Group revealed that momentum-driven commodity trading advisers cut their bullish Brent holdings to roughly 55 per cent, down from 73 per cent at the beginning of the trading day.
Trump Rules Out Escalating Military Operations
In his interview with the Financial Times, US President Donald Trump stated that he currently has no intentions of escalating military operations in West Asia. For the first time in history on an election day, pump prices surpassed $4 a gallon as voters went to the polls on Tuesday.
“With this election result and Iran’s economic situation, it does seem like a deal is more likely than not,” said Ajay Parmar, director of energy at ICIS. “Trump’s strength is reduced considerably.”
Ajay Parmar, director of energy at ICIS
Energy analysts pointed to institutional shifts in Washington following the vote. With both chambers now capable of passing resolutions, holding back war funding and delaying confirmations, the administration faces a shorter political runway and greater institutional pressure to find a Hormuz deal,
said Claudio Galimberti, chief economist at Rystad Energy.
Saudi Aramco Plans to Scale up Oil Output
Despite expectations of a ceasefire, physical market data from the US Energy Information Administration indicated that domestic diesel stockpiles were below 100 million barrels for the first time since 2003. According to a JPMorgan Chase & Co. publication, the West Asian output recovery pushed global oil markets back into a surplus, leaving a daily excess of 1.4 million barrels in October.
Speaking on Tuesday during a post-earnings conference call, Chief Executive Officer Amin Nasser announced that Saudi Aramco plans to scale up oil output to the maximum this quarter, increasing deliveries beyond the near pre-war amounts recorded in October.
Earlier coverage: Energy Sector Rallies Nearly 12 Percent As Crude Prices Surge