By Mia Gindis, Charles Gorrivan and Grant Smith
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.
The global benchmark slumped to a session low of $93.22 a barrel, the lowest in two months, as traders digested the results of an election that was largely seen as a referendum on affordability and a war that’s deeply unpopular at home. West Texas Intermediate, meanwhile, plummeted below $90.
Wednesday’s declines also triggered selling from trend-following commodity trading advisers.
Prices took a fresh lunge lower after Vice-President JD Vance directly attributed Republican losses to the overseas conflict. Investors recalibrated positions to account for a sooner-than-anticipated wind-down, with Senate Minority Leader Chuck Schumer pledging to end the war, saying some Republicans would back the effort. Any progress towards a resolution could further boost flows through the vital Strait of Hormuz.
US President Donald Trump, for his part, told the Financial Times he had no immediate plans to ramp up fighting in West Asia. Gas prices averaged over $4 a gallon as Americans cast their ballots on Tuesday, exceeding that level on an election day for the first time on record.
“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.”
Technical factors also amplified oil’s sell-off. Trend-following commodity trading advisers slashed long positions to about 55 per cent in Brent from 73 per cent at the start of the session, according to data from Kpler’s Bridgeton Research Group. The robot traders are known for a tendency to exacerbate price swings.
The election could serve as an inflection point in a war that had no immediate end in sight and has roiled West Asian energy flows, pushing oil up about 50 per cent this year.
The squeeze on Persian Gulf supplies, along with escalating Ukrainian attacks on Russian refineries, has also driven up fuel prices. Data from the US Energy Information Administration showed that domestic diesel stockpiles were below 100 million barrels for the first time since 2003, indicating that a ceasefire would bring little immediate relief to an exceptionally tight global market.
In crude oil markets, however, physical market prices have generally weakened recently, with flows through Hormuz holding near pre-war levels. West Asian oil metrics indicate near-term supply is outpacing demand for the first time since July, while prices for North Sea cargoes have also eased.
Time spreads for both benchmarks also weakened broadly, with several narrowing to their lowest levels since mid-October. JPMorgan Chase & Co. said in a report that global oil markets had returned to a surplus as a result of the West Asian rebound, with an overhang of 1.4 million barrels a day in October.
Saudi Aramco will maximise oil production this quarter as it boosts shipments from near pre-war levels seen in October, Chief Executive Officer Amin Nasser said in a post-earnings call on Tuesday. The United Arab Emirates is considering a third oil-export pipeline that will deliver crude outside Hormuz, according to people familiar with the matter.
“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.
