Brent Falls 17% After U.S. Midterms as Middle East Oil Flows Recover
Brent crude fell about 17% over five trading days after the U.S. midterm elections, trading just above $91 a barrel early Tuesday. Middle Eastern oil flows have neared pre-war levels, but high freight costs and war-related insurance premiums continue to weigh on trade.
Brent crude prices fell about 17% over five trading days after the U.S. midterm elections, trading just above $91 per barrel early Tuesday as Middle Eastern oil flows recovered toward pre-war levels. The decline points to growing supply pressure, but elevated shipping and insurance costs are keeping the delivered cost of crude high.
Vessel-tracking services have indicated for more than a month that oil flows through the Strait of Hormuz and the wider Middle East have returned close to pre-war levels. The rise in supply, combined with weaker global demand amid high prices, has put pressure on regional crude benchmarks.
Moving a barrel of crude from the region cost about $5 before the war and now costs as much as $30, and sometimes more, because of war risks, insurance premiums and high tanker rates.
Middle Eastern producers have cut official selling prices to attract buyers as increased Persian Gulf exports weaken local crude prices. High freight costs have also made lower prices necessary to compete for price-sensitive buyers in Asia.
Saudi oil company Aramco cut the price of its flagship Arab Light crude for Asia, for December loading, by $2 per barrel last week. The price was set at a discount of $6.50 per barrel to the Oman/Dubai average, the steepest discount to the regional benchmark since May 2020.
The supply rebound has not made shipping through the Strait of Hormuz safe. Attacks on vessels have intensified in the past month, while tanker movements and ship-to-ship transfers in the Gulf of Oman are tying up a large part of the global tanker fleet.
“Middle East crude exports have returned to pre-war levels, while refined product flows remain at just 37% of normal,” Ole Hansen, head of commodity strategy at Saxo, said.
Refined fuel exports from the Middle East have recovered more slowly than crude shipments. War-related risks and high insurance costs remain part of the cost of moving oil, while producers work to restore trade routes.
Market hopes for a U.S.-Iran agreement have risen in recent days amid signs that U.S. President Donald Trump could pursue diplomacy rather than escalation. Brent’s decline after the elections followed several breakdowns in efforts to hold talks over the past eight months.
The Dubai benchmark’s November contract moved into contango early last week, a market structure in which near-term oil is priced below later deliveries. That signaled that immediate supply concerns had eased as Middle Eastern flows increased.
