Oil Prices Plunge 8% as Midterms Lift Iran Peace Bets

Oil prices fell more than 8% on Wednesday, November 4, to their lowest level in over two months, after President Donald Trump's Republicans lost control of Congress in the US midterm elections. Traders bet that a weaker White House could speed up an end to the US-Israeli war with Iran, Reuters reported.

How far oil prices fell

Brent crude futures settled $8.98, or 8.7%, lower at $94.62 a barrel. US West Texas Intermediate (WTI) fell $7.97, or 8.3%, to $88.12. Both benchmarks closed at their lowest since August 31. The settlement came in the early hours of Thursday, Thailand time.

It was one of the sharpest one-day falls since the war began. Before the vote, crude had stayed high for months because of attacks on shipping and the risk to supplies through the Strait of Hormuz.

Why traders are betting on peace

Democrats won both the House of Representatives and the Senate. Two sources close to Gulf government circles told Reuters that a weakened Trump, facing a Congress able to limit his military options, has more reason to seek a deal, and that a full-scale assault on Iran now looks less likely.

Trump also told the Financial Times that the US had no immediate plans to strike Iran. On Wednesday he accepted that the war played a part in his party's defeat.

"The Democratic control of Congress could also tighten US military spending in the Middle East and further heighten the possibility of a peace deal sooner than later," said Dennis Kissler, senior vice president of trading at BOK Financial.

Not everyone is convinced

Some analysts warned the sell-off may be early. Carl Larry of Enverus said he was more worried about an escalation in Iran than a quick resolution. Gulf analysts also told Reuters that a deal which leaves Trump looking defeated could lead to reckless moves as easily as restraint.

Iran's Supreme Leader Ayatollah Mojtaba Khamenei said in a written statement that US hostility would continue whichever party was in power, and a senior Iranian official told Reuters the two sides are still far from a deal.

Other supply news in the Reuters report:

• Gulf exports of crude, condensate and fuels averaged 17.1 million barrels per day in October, according to Vortexa data, down from 18.9 million in September and about three-quarters of pre-war levels.
• The UAE is considering a third pipeline that would carry crude around the Strait of Hormuz, Bloomberg reported.
• US crude stocks fell by 865,000 barrels to 409.8 million barrels in the week to October 30, the Energy Information Administration said. Analysts had expected a rise.

What lower oil prices mean for Thailand

Thailand imports most of its crude, so a lasting drop in oil prices would ease costs for transport firms, airlines and manufacturers. Fuel costs have been a hot political issue this year, with truck operators demanding a cap on diesel prices.

Thai business leaders also welcomed the US election result. Ongart Kittikhunchai, president of the Thai Food Processors' Association, told the Bangkok Post he hoped Middle East conflicts would end or at least ease, which would help the global economy and Thai farm exports. He said war-related rises in energy, packaging, logistics and fertiliser costs are squeezing his members.

Krungsri Securities warned that a war-driven surge in crude could still fuel inflation and push up interest rates. Paradorn Tiaranapramote of Asia Plus Securities said money moving out of US technology and energy stocks could flow into emerging markets such as Thailand, with hospital stocks among possible winners.

For Phuket, cheaper jet fuel would help airlines and could make long-haul fares easier on tourists, but only if the fall holds. Read the full market report from Reuters via GMA News.

Related: US midterm results, Iran-US talks stall and Thailand diesel protest by truckers.

Photo: oil pumpjack in the Permian Basin near Monahans, Texas, by Quintin Soloviev / Wikimedia Commons, CC BY 4.0. File photo; oil prices fell to a two-month low.