- Brent fell about 8.7% on Wednesday to settle below $95per barrel on Wednesday.
- It was the first time Brent had dropped below $100 since early October.
- Prices have since bounced to roughly $96, but remain lower by 13% this week.
- Brent fell about 8.7% on Wednesday to settle below $95per barrel on Wednesday.
- It was the first time Brent had dropped below $100 since early October.
- Prices have since bounced to roughly $96, but remain lower by 13% this week.
Why it fell
The main driver was geopolitics, not US domestic energy policy. Republicans lost control of both the House and Senate, which sparked hopes of a de-escalation in the Iran war. Trump acknowledged that the war and rising fuel prices contributed to the losses, while signalling no immediate escalation of strikes.
Traders removed part of the war risk premium, and the dollar also weakened to a two-month low. The sell-off was amplified because Brent has swung between roughly $70 and $120 since the war began, and the price was around 20% below its late-October high.
Where it might go next?
Ultimately, the price of Brent will be determined by the next development in the war in the Middle East. Technical analysis is useful, but only to a point, and it is worth noting that headline risk is still the key driver for the oil price right now.
Downside: Brent is just above its 200-day moving average near $92.40. A break below that level, or credible ceasefire talks, could open a move towards the low-to-mid $80s as the war premium unwinds.
Upside: The Midterm election result doesn't change the physical picture for the oil price or immediately erode the supply constraints. The new Congress doesn't take office until January, and Trump has only signalled no immediate escalation, so a renewed strike or supply disruption could quickly push Brent back above $100.
The Base case: Traders could lose patience with the prospect of a diplomatic solution to the war, if it drags on with no new ceasefire or deal. This means that choppy trading in a $88–100 range for Brent crude could be in focus, with headlines on Iran talks driving most of the moves.
What to watch
- Any formal US–Iran diplomatic channel or ceasefire announcement
- Shipping and supply disruption in the Gulf
- The direction for the dollar, which remains under pressure as we move through the week.
Chart 1: Brent crude oil, daily chart
Source: XTB. Past performance is not a reliable indicator of future results.
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