Oil Prices Fall as Midterm Results Raise Hopes for Iran Peace

Crude oil prices fell sharply this week as the results of the U.S. midterm elections raised market expectations for a possible resolution to the Iran War. Despite continuing attacks on commercial shipping and another decline in U.S. crude inventories, optimism surrounding potential diplomatic progress reduced the geopolitical risk premium that had supported oil prices.

WTI declined approximately $13 per barrel for the week, while Brent fell nearly $15. Natural gas posted a modest gain as cooler fall weather supported demand, although increasing production and another above-average storage injection continued to limit prices.

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Oil

Fundamental Analysis

Oil prices plummeted this week following last week's rally as the market interpreted the U.S. midterm election results as potentially bringing an end to the Iran War. Continued attacks on vessels in the Persian Gulf and the ongoing Saudi-Houthi conflict were not enough to offset the decline.

WTI reached a weekly high of $102.75 per barrel on Monday and a low of $86.65 on Thursday. December WTI futures declined approximately $13 per barrel for the week.

Brent crude reached Monday's high of $106.65 per barrel before falling to a low of $93.40 on Wednesday. Brent declined nearly $15 per barrel compared with the previous week, while the WTI/Brent spread narrowed to approximately $7.50.

Prior to Tuesday's midterm elections, reports suggested some diplomatic progress between the United States and Iran, with Qatar serving as an intermediary. President Trump had previously pledged to delay additional military action until after the elections but ordered a strike on Iran's Qeshm Island before voting began.

The election results increased market optimism about a possible settlement. According to the commentary, Democratic victories reflected, in part, public opposition to the war and its impact on energy prices.

However, substantial uncertainty remains. The Trump Administration could continue military action against Iran, while Iranian forces have continued attacking commercial vessels in the Persian Gulf, including the reported use of small boats to attach explosive limpet mines to ship hulls.

Yemen-based Houthi forces also continue threatening Saudi Arabia's access to Red Sea export routes.

Despite these disruptions, oil continues moving through the Strait of Hormuz. Estimates vary, but some reports place shipments as high as 20 million barrels per day.

JPMorgan estimates that global crude markets could be experiencing a surplus of approximately 1.1 million barrels per day, reflecting improving shipments and weaker demand.

Refined-product supplies remain significantly more constrained. Damage to refineries upstream of the Strait of Hormuz continues limiting shipments of gasoline, diesel and other products.

Ukraine has also continued targeting Russian refining infrastructure, reportedly striking six refineries this week alone. Russia maintains its ban on diesel exports, with exceptions for previously committed shipments to the United States.

U.S. Petroleum Snapshot

The Energy Information Administration's Weekly Petroleum Status Report indicated that commercial crude oil inventories decreased by 865,000 barrels to 409.7 million barrels, approximately 4% below the five-year average.

This marked the fifth consecutive weekly decline in commercial crude inventories. The American Petroleum Institute had forecast a 5.3 million-barrel draw, while analysts expected a smaller decline of approximately 200,000 barrels.

Gasoline inventories decreased by 220,000 barrels to approximately 209 million barrels, 2% below the five-year average.

Distillate inventories declined by 3.6 million barrels to 99 million barrels, approximately 13% below the five-year average, highlighting continued tightness in refined-product supplies.

Refinery utilization increased to 94.5%, compared with 92.8% the previous week. Crude inputs increased by approximately 200,000 barrels per day to 16.7 million barrels per day.

Gasoline demand increased to 8.8 million barrels per day from 8.6 million barrels per day the previous week.

Crude imports remained at approximately 6.4 million barrels per day, while crude exports declined to 3.7 million barrels per day from 4.9 million barrels per day. Refined-product exports decreased to 7.2 million barrels per day from 7.7 million barrels per day.

The Strategic Petroleum Reserve remained at approximately 283 million barrels, its lowest level since 1982.

Inventories at Cushing, Oklahoma increased by approximately 30,000 barrels to 27.3 million barrels, representing about 35% of storage capacity.

U.S. crude production increased by approximately 11,000 barrels per day to 14.003 million barrels per day, compared with 13.992 million barrels per day the previous week and 13.65 million barrels per day a year earlier.

The U.S. oil and gas rig count increased by one to 604, compared with 548 a year ago. Oil-directed rigs increased by one, natural gas rigs increased by one, and miscellaneous rigs declined by one.

Crude imports from Venezuela have increased substantially during 2026. Approximately 200,000 barrels per day were being delivered at the beginning of the year, rising to a peak of 700,000 barrels per day in July before declining to 655,000 barrels per day in August.

Average gasoline prices declined to $4.07 per gallon, down $0.13 from the previous week and $0.31 from the previous month, but $0.99 higher than a year earlier.

Diesel prices were reported at $6.23 per gallon, down $0.09 from the previous month but $2.52 above year-earlier levels.

U.S. refiners continue operating above 90% utilization, with some facilities deferring routine maintenance to meet strong diesel demand.

On the economic front, October employment increased by 165,000 jobs, compared with September's gain of 29,000 and expectations for 59,000 additional jobs.

The unemployment rate declined to 4.1%, compared with expectations of 4.2%. Personal income increased 0.37%, representing an annualized rate of approximately 3.12%, still below inflation.

The stronger-than-expected employment report could give the Federal Reserve additional flexibility to raise interest rates to combat inflation without significantly weakening the labor market.

U.S. equity markets experienced substantial volatility. Stocks rallied Wednesday as investors anticipated that the midterm election results could lead to an eventual end to the Iran War.

However, technology stocks suffered a sharp selloff Thursday, with the Dow Jones Industrial Average declining approximately 1,800 points, the S&P 500 falling 4.3%, and the Nasdaq losing 5.5%.

Markets rebounded Friday but finished lower for the week. Both the U.S. dollar and gold moved higher.

Oil – Technical Analysis

December WTI NYMEX futures traded well below their 8-, 13-, and 20-day moving averages following the week's sharp decline.

Trading volume was approximately in line with the recent average at 250,000 contracts.

The Relative Strength Indicator declined to 43, indicating neutral momentum conditions.

Oil – Looking Ahead

Several countries, including China and South Korea, have begun replenishing strategic petroleum reserves following substantial drawdowns over the past eight months.

As the United States and other countries begin similar efforts, reserve replenishment could provide an additional source of demand and establish a degree of support for global crude oil prices.

An estimated 1.0 billion barrels of strategic reserves have been drawn down during the Iran War, according to the commentary.

However, removing the geopolitical risk premium from oil prices will likely require an actual cessation of hostilities and substantive peace negotiations.

After falling rapidly this week, crude prices rebounded Friday, suggesting that the selloff may have moved too far, too quickly.

The 8–14-day weather forecast remains unfavorable for heating-oil demand, with above-normal temperatures expected to limit near-term consumption.

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Natural Gas

Fundamental Analysis

December NYMEX natural gas futures posted a modest gain this week as cooler fall weather provided some support for demand.

However, prices remain below levels typically associated with a winter futures contract, as domestic production continues increasing and storage injections remain above historical averages.

Natural gas reached a weekly high of $2.97/MMBtu on Friday and a low of $2.87 on Wednesday.

Natural gas demand was estimated at approximately 105 Bcfd, reflecting lower power-generation consumption and increased residential demand, while supply was estimated at approximately 117 Bcfd.

LNG exports were approximately 20 Bcfd, while natural gas exports to Mexico were estimated at 6.9 Bcfd.

International natural gas prices declined somewhat but remained significantly above U.S. levels.

U.K. NBP natural gas was quoted at $28.30/MMBtu, Dutch TTF futures at $29.90/MMBtu, and Asia's JKM at $31.60/MMBtu.

European and Asian buyers continue competing for available LNG shipments, supporting international prices despite weaker near-term U.S. demand.

The EIA's Weekly Natural Gas Storage Report indicated an injection of 77 Bcf, compared with a forecast of 81 Bcf and a five-year average injection of 61 Bcf.

Total working natural gas in storage increased to 3.801 Tcf, approximately 2.8% below the previous year but 1.4% above the five-year average.

Natural Gas – Technical Analysis

December NYMEX Henry Hub natural gas futures are trading above their 8- and 13-day moving averages but remain below the 20-day moving average.

Trading volume was below the recent average, with the commentary reporting approximately 170.

The Relative Strength Indicator is 35, indicating weak momentum and approaching traditionally oversold conditions.

Natural Gas – Looking Ahead

Natural gas production remains relatively steady, while above-normal temperatures continue delaying the onset of typical fall heating demand.

LNG exports are expected to remain strong, supported by international demand and elevated global natural gas prices.

The surplus of natural gas in storage relative to the five-year average increased during the past week.

Based on the 8–14-day weather outlook, storage injections could continue over the next two weeks. However, it appears unlikely that total working natural gas in storage will reach 4.0 Tcf before seasonal heating demand begins increasing.

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Weekly Oil & Gas Commentary is provided for informational and educational purposes and should not be considered investment, trading or financial advice.