The Commodities Feed: US midterm elections key for oil market

Energy – Ukraine resume attacks on Russian refineries Oil prices finished strong last week, with ICE Brent settling almost 2.4% higher on Friday to close above $113/bbl. It was also the Dec-26 contract expiry; it settled at $117.64/bbl on its last trading day. Vessels have faced a growing number of attacks in recent weeks. Yet this coincides with signs that more traffic is flowing through the Strait of Hormuz. Fears remain high over the potential for fresh US and Israeli strikes on Iran following the US midterms. Reports say that President Trump wants to give diplomacy a chance are weighing on prices in early morning trading today. Iranian negotiators have been in Doha over the weekend, holding talks with Qatari mediators. It remains to be seen whether this will lead to anything.

The price action in oil in recent weeks reflects a market increasingly bracing for the potential for more hostilities between the US and Iran. If the midterms pass with neither strikes nor a deal, the key question is whether the market continues to price in a substantial geopolitical risk premium or whether that premium gradually begins to unwind. Given that many of the key developments in this conflict have unfolded over weekends, the market may have to hold its breath until the end of the week.

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