CRUDE OIL PLUNGES AS BRENT LOSES NEARLY 20% SINCE THE WEEKLY OPEN ON EXPECTATIONS OF A DIPLOMATIC RESOLUTION

(MENAFN- MENAFNEditorial) 
Written by Antonio Di Giacomo, Senior Market Analyst at XS.com.

CRUDE OIL PLUNGES AS BRENT LOSES NEARLY 20% SINCE THE WEEKLY OPEN ON EXPECTATIONS OF A DIPLOMATIC RESOLUTION

Crude oil extends losses on November 4 as investors assess the results of the U.S. midterm elections and prospects for a diplomatic resolution to the conflict in the Middle East. Based on the prices provided, Brent stands at $93.22 per barrel and West Texas Intermediate (WTI) at $87.13, in a session marked by sharp shifts in market expectations.

Since opening the week around $116, Brent has fallen about $22.78 per barrel, or 19.64%. Meanwhile, WTI has fallen from around $103.20, down $16.07 per barrel, or 15.57%. These changes reflect the shift from the weekly opening reference levels to the current prices, rather than the s’ssion’s decline alone.

The U.S. election outcome adds a political dimension to the ener’y market’s adjustment. Democrats gained control of both chambers of Congress, which could create additional obstacles for D’nald Trump’s agenda and increase pressure on funding for military operations. However, the legislative shift does not imply an immediate change in U.S. strategy, so traders remain focused on White House decisions.

The possibility of avoiding another military escalation is a main factor driving crude prices lower. Following recent U.S. strikes on Iranian defense facilities, Trump indicated that there are no immediate plans for further airstrikes. The market interprets this position as an opportunity to keep negotiations open, although his remarks do not rule out the use of force if talks fail.
Meanwhile, Qatar is stepping up its mediation efforts between Washington and Tehran, with proposals aimed at preventing further clashes and narrowing differences over the Strait of Hormuz. Nevertheless, significant disagreements remain: Iran considers the U.S. response insufficient and continues to press demands concerning oil sanctions, the naval blockade, and the release of frozen funds. For now, diplomatic activity represents the possibility of an agreement rather than a confirmed resolution.
From a market perspective, the decline aligns with a lower geopolitical risk premium embedded in prices. When fears of supply disruptions increase, crude oil prices tend to rise because of the possibility of reduced future availability. If investors perceive a greater likelihood of negotiations and a return to normal shipping conditions, part of that premium can disappear even before an agreement is signed.

Supply risks, however, remain. The attack on another crude oil tanker in the Strait of Hormuz reminds us that shipping security remains vulnerable. A new attack on vessels or energy infrastructure could quickly shift expectations, raise transportation costs, and renew upward pressure on prices, particularly if it materially affects regional exports.

Shipping trends also warrant attention. Recent reports point to a partial recovery in crude exports from the Middle East, helping ease concerns about physical availability. However, the recovery in refined product flows remains more limited, meaning that falling crude prices will not necessarily translate into lower fuel prices as quickly or to the same extent.

Over the coming session’, oil’s direction will depend on the mix of diplomatic progress, maritime security, and supply-and-demand signals. The scale of the weekly decline reflects a significant adjustment in expectations, but it does not guarantee that the downward trend will continue uninterrupted. A verifiable agreement could deepen losses, while deteriorating talks or fresh supply disruptions could trigger sharp rebounds.

In conclusion, from reference levels of around $116 for Brent and $103.20 for WTI, prices have fallen approximately 19.64% and 15.57%, respectively, to the levels provided. The move reflects a lower perceived risk of escalation and stronger expectations for negotiations. However, the absence of a final agreement and the vulnerability of shipping through Hormuz leave the market exposed to sharp swings. A sustained decline will depend on diplomatic signals translating into concrete improvements in energy supply.

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