Brent crude oil prices sharply decreased following the Democrats' victory in the U.S. midterm elections, reaching $94.62 per barrel. This decline, which is the steepest drop since 2020, occurred with a 16.6% decrease between the peak on October 30 and November 4. On that day, the January contract closed down by $8.98 per barrel.
Analysis of the Crude Oil Market and Its Impacts
Market analysts attribute the primary reason for this change to increased pressure on Washington to end the war with Iran. Trading trend-influenced flows (CTAs) also exacerbated this decline by selling approximately 126 million barrels of crude oil and products since October 30. Specifically, 52 million barrels were sold on November 4 alone. Despite this decline, Brent crude oil prices have returned to around $97 per barrel, due to new incidents involving tankers in the Strait of Hormuz.
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Market Status and Future Predictions
Analyses indicate that October was the heaviest month of the war, with 35 attacks on ships recorded. However, oil flows out of the region remain high, averaging 16.6 million barrels per day in October (excluding Iranian oil), down from 17.1 million barrels in September.
Currently, physical pressures in the market have also increased. Recent reports show that the price difference for Dubai has decreased from +$18 to +$1.70 per barrel in the month. Additionally, the North Sea spread reached -$3.20 on November 4, marking the weakest position since May 2020. Aramco has reduced its Arab Light OSP price for Asia to the lowest level in six years, reaching $2 per barrel below the market.
Transportation conditions have also impacted these equations. With the average PG-China shipping cost reaching a record $36.60 per barrel in October, shipping costs have emerged as a key factor in determining prices. As a result, sellers in the Gulf are forced to lower prices to cover these costs.
Market analyses indicate that in the fourth quarter, there is a surplus supply of 1.1 million barrels per day. Currently, the price of Dubai oil has reached about $96 per barrel, which is approximately $9 below initial forecasts for November.
However, geopolitical risks still exist in the market, and as negotiations to reduce tensions continue, prices may be affected. Diplomats are actively working towards de-escalation, and these developments are expected to impact the market.
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