Oil prices extended losses this morning as investors weighed the Democratic sweep of Congress in the Midterms and what it means for President Trump's approach to Iran, amid uncertainty over whether Washington will pursue diplomacy or renew military strikes. Specifically, the results could introduce additional constraints on Trump's agenda, particularly around funding overseas military operations and other foreign policy commitments.
Additionally, Qatar said Tuesday that mediation between Washington and Tehran was continuing, with both sides reviewing proposals exchanged through intermediaries, and for now, Trump said he had no immediate plans for launching more strikes on Iran.
“We’re locked and loaded if we need to go, but there may be no reason for it,” he said in an interview with the Financial Times.
But for now, all eyes are on the inventory and supply data...
DOE
- Crude -865k
- Cushing +280k
- Gasoline -222k
- Distillates -3.565mm
Crude stocks fell for the fifth straight week while Distillates inventories plunged...
Diesel supplies plunged back below 100mm barrels for the first time since 2003...
The draw in commercial crude stockpiles was boosted by another 399,000 barrels withdrawn from the Strategic Petroleum Reserve. That increased the overall nationwide crude draw to 1.26 million barrels in the week to Oct. 30. A total of 133 million barrels of crude has been taken out of the SPR since late March under a program to release 172 million barrels as part of a relief plan coordinated by the International Energy Agency aimed at lowering energy costs.
Crude production edged up last week to top 14 million barrels a day for the first time in weekly data going back to 1983.
The small increase came as the number of rigs drilling for oil rose again, with two units put into operation, according to Baker Hughes. The company’s estimate of active US oil rigs stood at 462 on Friday.
WTI is off the lows of the day but still down notably overnight...
Finally, for oil traders, the more immediate question is whether Washington will pursue a diplomatic agreement with Tehran or launch another round of military strikes.
“The next 72 hours will be critical for determining whether the recent renewed diplomatic momentum translates into genuine improvement in energy market chaos, or if it is simply another short-lived correction,” said Emily Ashford, head of energy research at Standard Chartered.
“The election doesn’t guarantee de-escalation.”
ING analysts Warren Patterson and Ewa Manthey said the market has increasingly priced in the risk of further hostilities between the U.S. and Iran. If the elections pass without a fresh military escalation or a diplomatic breakthrough, traders will have to assess whether the geopolitical risk premium embedded in oil prices can be sustained or is likely to unwind, they said.
“The big question now is what lies ahead on the foreign policy front and specifically the Middle East crisis,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS. “The market seems to be betting Trump wants to put it behind him, raising the prospect for some sort of deal.”