Summary

  • Oil posted its biggest weekly drop since April 2020, with Brent crude and WTI continuing to fall.
  • Expectations tied to the US midterm elections result and negotiations with Iran weighed on oil, though prices could rebound if military tensions in the Middle East escalate again.
  • Recovery in output among OPEC members, Russia-Ukraine peace talks, and monthly reports from the EIA, OPEC and IEA are being watched as key factors that will shape the future direction of oil prices.

Oil posted its biggest weekly decline since 2020, with market attention turning to the direction of negotiations between the US and Iran.

Bloomberg reported on November 8 that Brent crude futures fell below $98 a barrel, extending the previous week's slide. West Texas Intermediate traded around $90 a barrel. Brent plunged more than 16% last week, its steepest weekly drop since April 2020.

Oil turned lower after reaching a six-month high in late October. Expectations that the risk of further military escalation with Iran would ease after Democrats won control of both chambers of Congress in the US midterm elections weighed on prices.

President Donald Trump said on November 8 that the likelihood of additional airstrikes would be very low if substantial progress were made in talks with Iran. Secretary of State Marco Rubio, by contrast, was more cautious about the chances of a deal, saying Iran's demands were difficult to accept.

Jorge Leon, head of geopolitical analysis at Rystad Energy, said increased US pressure in the negotiations does not mean an actual agreement is close. He added that if military tensions in the Middle East flare again, much of last week's drop in oil prices could quickly be reversed.

Military conflict in the Middle East is also continuing. The United Kingdom Maritime Trade Operations said a tanker transiting the Strait of Hormuz over the weekend was reported to have been struck by an unidentified projectile. Yemen's Iran-backed Houthi rebels attacked an office of Saudi state oil company Aramco in Riyadh, and Saudi forces responded by destroying two missile launchers.

Still, oil supply conditions are gradually improving. Although attacks on ships in the Strait of Hormuz have continued, crude exports from the Persian Gulf have nearly returned to prewar levels. A Bloomberg survey showed oil production by members of the Organization of the Petroleum Exporting Countries had recovered to 88% of February levels.

The market is also watching Russia-Ukraine peace talks and outlooks from major agencies, in addition to negotiations with Iran. Russia is scheduled to send a senior delegation to US-mediated peace talks in Abu Dhabi on November 10. Monthly reports due this week from the US Energy Information Administration, OPEC and the International Energy Agency are also being closely watched as key drivers of oil's next move.

Suehyeon Lee