Oil set for sharp weekly drop but Middle East supply concerns provide floor

BEIJING/PERTH: Oil prices are set for a sharp weekly drop on expectations of a de-escalation of the Iran war after US President Donald Trump’s party suffered election losses, but Middle East supply concerns from the conflict continue to provide a floor for the market.

Brent crude futures for January rose on Friday by $1.29, or 1.31%, to $99.58 a barrel as of 0504 GMT.

US West Texas Intermediate futures climbed 86 cents, or 0.95%, to $91.38 a barrel.

Brent briefly breached the $100-a-barrel mark in morning trade.

Both contracts gained for a second day. Still, the Brent contract is on track to drop by 12% this week after the December contract expired on October 30, while WTI is set to drop 12.1%.

The contracts plunged earlier this week on expectations that US midterm elections on Tuesday, which swung the Senate and House of Representatives to the Democratic Party from Trump’s Republicans, could lead to a de-escalation of the US-Israeli war against Iran, now in its ninth month.

Oil prices fell 8% on Wednesday alone after the Democrats swept the elections, settling at two-month lows.

However, prices rebounded on a surge in tanker attacks on Wednesday and Thursday in the Gulf and the Strait of Hormuz — the crucial sea outlet for a majority of Middle Eastern oil shipments — that renewed the concerns about supply flows from the region.

KCM chief analyst Tim Waterer described Friday’s rise as a “technical recovery” from the steep selloff after the US elections, but said the underlying driver was a realisation that the problem had not disappeared and attacks in the Strait of Hormuz were unaffected by a Democratic win.

“Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines,” he said.

US VP Vance says Iran war is ‘the reason we lost’ midterms

Iran said on Thursday that three more tankers had been attacked in the Strait of Hormuz, and data from Britain’s maritime security agency UKMTO suggested that attacks on oil-carrying ships are still running at close to record pace.