Oil heads for biggest weekly loss since 2020 on Iran hopes

Oil was on course on Friday, November 6, for its steepest weekly drop in years after a turbulent week of trading. Investors are betting that the nine-month war in the Middle East could be nearing an end. Even so, President Donald Trump's latest comments on Iran kept Brent close to $100 a barrel. According to Bloomberg, Brent is heading for its biggest weekly loss since April 2020. Front-month futures were down about 16% for the week, though that figure includes a roll from the December contract to January. The January contract alone fell almost 13%.bloomberg.com

A Volatile Week

Prices moved higher in early Asian trading on Friday, building on a recovery from the sharp selloff after Democrats swept the US midterm elections. On Wednesday, November 4, both benchmarks fell more than 8% to their lowest settlements since August 31. On Thursday, Brent closed at $98.29 and West Texas Intermediate at $90.52, after new attacks on tankers revived supply concerns, Reuters reported.finance.yahoo.com+1

Traders have read the Republicans' weak midterm showing as a sign that Trump will not quickly restart hostilities with Iran, CNBC-TV18 reported. On Thursday, however, Trump said Iran could not take any action on its nuclear program without Washington's approval. He added that he would have to decide whether to take further action against Tehran or accept the current situation. Diplomacy has added to the optimism: The New York Times reported that Iran is reviewing nuclear proposals from mediators, with Qatar working to prevent a return to full-scale fighting. Tehran still wants the US to lift its naval blockade of Iranian ports, ease sanctions and release frozen assets before it fully reopens the Strait of Hormuz.cnbctv18.com

Risks Still Weigh on Supply

The risks to shipping have not gone away. At least five vessels have reported incidents in the Gulf since Sunday, according to the UK maritime security agency UKMTO. That pace is close to October's, when 35 vessels were hit, the most in any month of the war. Eurasia Group cut its estimate of the chance of renewed US strikes to 60% and its estimate of a deal to 10%. It warned that an escalation could push Brent into a range of $110 to $125.finance.yahoo.com

Physical crude markets have weakened since last month. That is happening even though global onshore stockpiles are at their lowest in at least a decade and government strategic reserves are at their lowest since the 1980s, the International Energy Agency said. Citi Research analysts see much further downside if the strait reopens fully, and the bank has moved to underweight energy stocks. Gelber and Associates took a more cautious line. They said Thursday's rebound "reflects caution about pricing in a rapid normalization of oil flows before diplomatic progress translates into dependable shipping and deliveries".cnbctv18.com+1