Brent crude has recorded its steepest weekly fall since the Covid-19 pandemic, dropping about 17% in a week as traders bet that the US midterm elections have opened the way to a diplomatic deal with Iran.
Key Points
- Brent crude weekly fall — Brent settled on Friday at $98.32 a barrel, down from $117.64 a week earlier.
- The roughly 17% weekly drop is the steepest since the start of the Covid pandemic, and the biggest in dollar terms since 1988.
- US crude (WTI) fell about 13% over the week to $90.83 a barrel.
- Traders are pricing in hopes of a US-Iran deal, but no agreement has been announced and tanker attacks continue.
The week was defined by one dramatic session. On Wednesday, Brent crashed about 9% — $10.08 to $93.52 a barrel — after Democrats won the midterm elections, with traders betting the result lowers the odds of renewed fighting with Iran and raises the chances of a negotiated settlement. Prices recovered some ground later in the week, settling at $98.32 on Friday, up 3 cents on the day, but the weekly damage was already done.
According to Reuters, the 17% decline would be the steepest weekly percentage fall since the start of the Covid-19 pandemic, and the biggest in absolute dollar terms in London Stock Exchange Group data going back to 1988. WTI was set for a 13% weekly fall.
Why traders sold the war premium
The selling was driven by politics, not supply. The Democratic sweep raised hopes of de-escalation in the US-Israeli war on Iran, and reports said Iran had sent a nuclear proposal through Qatar, with conditions including an end to the US naval blockade, sanctions relief and unfrozen assets. No agreement has been announced, and analysts also point to signs of an emerging supply surplus as Middle Eastern oil exports recover.
But the market has not fully let go of the risk. Attacks on ships in the Middle East continued through the week and provided a floor for prices. One seafarer was killed in a missile strike on an oil products vessel on 5 November, and tanker attacks around the Gulf and the Strait of Hormuz remain close to record levels.
What happens next
Attention now turns to the data. The US October consumer price index is due on Tuesday, 10 November, the Energy Information Administration publishes its short-term energy outlook the same day, and OPEC releases its monthly report on Wednesday. Traders will be watching for any concrete sign of a US-Iran agreement — and for whether the week’s plunge was the start of a lasting fall in the war premium, or a bet that runs ahead of events.
For background on the week’s earlier moves, see our report on oil crashing below $94 as markets cheered the Democratic sweep, and on US strikes on Iran’s Qeshm Island as oil rebounded. More in our Business section.
Sources: Business Recorder (Reuters), “Brent oil price benchmark set for biggest weekly drop since 2020“; London South East (Reuters), “Brent oil price benchmark set for biggest weekly drop since 2020“.