Oil futures moved higher on Thursday after the previous session’s decline of more than 8%, as investors considered how the Democratic Party’s gains in the US midterm elections could affect Washington’s approach to the conflict with Iran.
Brent crude futures rose 0.9% to $95.56 a barrel at 04:21 ET (09:21 GMT), while US West Texas Intermediate (WTI) futures increased 0.2% to $88.31 a barrel.
The movements followed Wednesday’s decline, when both oil benchmarks settled at their lowest levels since 31 August. Attention remained on the political implications of the election results, the security of energy shipments through the Strait of Hormuz and the latest US petroleum inventory figures.
Oil Benchmarks Rise After Declines Exceeding 8%
Brent futures ended Wednesday’s session at $94.62 per barrel, a decrease of $8.98, or 8.7%.
WTI crude settled at $88.12 a barrel, down $7.97, equivalent to 8.3%.
Both benchmarks recorded their lowest closing prices since 31 August.
By Thursday morning, Brent had returned above $95 per barrel, while WTI was trading slightly above its previous settlement.
The partial recovery followed a reassessment of geopolitical developments that had contributed to substantial changes in crude prices during the previous session.
Democratic Election Victory Raises Questions About US Military Policy
Democrats won control of both chambers of Congress in the US midterm elections, changing the political balance in Washington.
The result prompted investors to consider whether the incoming Congress could seek to restrict military funding or increase pressure on President Donald Trump to negotiate an end to the conflict with Iran.
Trump acknowledged that the war had been a factor in the Republican Party’s election defeat.
Vice President JD Vance also questioned the economic and political consequences of continuing the conflict.
Market participants viewed the election outcome as potentially increasing the likelihood of diplomatic efforts to reduce hostilities.
However, the extent to which the new congressional balance will influence US military and foreign policy remains uncertain.
Potential De-escalation Could Affect Persian Gulf Oil Shipments
Investors continued to monitor developments affecting the Strait of Hormuz, an important maritime route for global energy supplies.
A reduction in regional hostilities could eventually improve conditions for transporting oil through the waterway.
Such developments could affect supply expectations and the geopolitical risk premium reflected in crude prices.
Trump stated that Washington had no immediate plans to launch additional strikes against Iran.
Nevertheless, the United States conducted limited strikes on Iran’s Qeshm Island earlier in the week, describing the action as defensive.
The combination of diplomatic expectations and continuing military activity left uncertainty surrounding the outlook for oil transportation in the region.
ING Sees Scope for Further Reduction in Oil Risk Premium
Analysts at ING said that the oil market could continue to reduce the geopolitical risk premium accumulated over recent months if the conflict does not escalate.
“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,” the analysts wrote.
ING also cautioned against drawing firm conclusions from the latest political developments.
“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,” the analysts added.
The assessment suggested that crude prices could remain sensitive to both the prospect of negotiations and the possibility of renewed military developments.
US Oil Inventories Fall by 865,000 Barrels
Weekly data from the US Energy Information Administration showed a reduction in domestic crude oil inventories.
Commercial crude stocks declined by 865,000 barrels in the week ended 30 October.
Analysts had forecast a larger decrease of 1.7 million barrels.
The smaller-than-expected draw indicated that crude inventories declined during the reporting period, although not by as much as the market had anticipated.
The report provided an additional measure of US supply conditions alongside the political developments affecting international oil prices.
Gasoline Stocks Decline Despite Expectations for an Increase
The EIA also reported a 222,000-barrel reduction in US gasoline inventories.
Market expectations had pointed to a modest increase in gasoline stocks.
Distillate inventories fell by 3.565 million barrels during the same period.
The distillate category includes diesel and heating oil, both of which are used across transport, industrial and heating applications.
The decline in distillate inventories was larger than the reductions reported for crude oil and gasoline.
The figures showed lower inventories across the three principal petroleum categories covered in the report.
Market Focus Remains on Iran and Supply Conditions
Thursday’s increase in oil prices followed a substantial decline as investors continued to assess the implications of the US midterm elections for the conflict with Iran.
The prospect of diplomatic negotiations contributed to changing expectations for the geopolitical risks affecting crude markets.
At the same time, the recent US strikes on Qeshm Island and uncertainty surrounding the conflict remained relevant to the outlook for Persian Gulf oil shipments.
ING analysts suggested that some of the geopolitical premium could decline if the conflict does not intensify, although they questioned the scale of Wednesday’s selloff.
US inventory figures added another consideration, showing decreases in crude oil, gasoline and distillate stocks during the week ended 30 October.
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