Crude oil prices have experienced massive volatility across the international market throughout this week, while on Friday morning, Brent crude prices once again surged to reach extremely close to one hundred dollars per barrel. Around seven in the morning, Brent crude futures were trading at ninety nine dollars and eighty six cents per barrel, registering an increase of one point six percent. Meanwhile, US West Texas Intermediate or WTI crude also rose by one point one five percent to reach ninety one dollars and fifty six cents per barrel. Prior to this, heavy selling was witnessed in the oil market on Wednesday. At that time, both major oil benchmarks plunged by more than eight percent to touch their lowest levels since August thirty one. However, this decline didn't last long, and prices started rebounding from Thursday evening.
The market staged a strong recovery on Thursday, which closed Brent crude futures up by three point eight percent at ninety eight dollars and twenty nine dollars per barrel. Similarly, US WTI crude also recorded an increase of two point seven percent and closed at ninety dollars and fifty two cents per barrel, while this upward momentum, which began on Thursday, continued into Friday morning as well.
Diplomatic atmosphere shifted by US elections
This hope for peace in the oil market has sparked following the results of the US midterm elections. In the election, Democrats secured control of both houses of the US Congress. It's believed that this political shift could limit the support President Donald Trump receives in a war against Iran. On the other hand, reports also suggest that Tehran is reviewing proposals provided by mediators regarding its nuclear program, while these signals have provided some relief to the market.
Iran's strict condition on the strait of hormuz
Amid diplomatic hopes, uncertainty regarding the security of oil supply still persists. Clearing its stance, Iran has stated that unless the US naval blockade is removed from its ports, it won't fully open the Strait of Hormuz, while along with this, Iran has also put forward conditions to ease sanctions imposed on it and immediately release seized assets.
Ships burning at sea, attacks on refineries
The threat to commercial vessels at sea continues to remain constant. According to UK Maritime Trade Operations or UKMTO, at least five incidents involving ships in the Persian Gulf have been reported since Sunday. Iran's Islamic Revolutionary Guard Corps stated that two oil tankers and a tugboat caught fire in separate incidents while attempting to use unauthorized routes in the Strait of Hormuz.
Crude could go back up to one hundred twenty five dollars
On the supply front, a relieving factor is that crude oil exports from Gulf countries have reached close to pre-war levels. However, transportation costs still remain quite high. Research firm Eurasia Group has reduced its estimate of new US attacks on Iran from sixty five percent to sixty percent, while at the same time, the probability of a diplomatic agreement has been cut from twenty percent to ten percent. The firm has increased the likelihood of a prolonged stalemate from fifteen percent to thirty percent. Eurasia Group has warned that if these tensions escalate again, Brent crude prices could return to the range of one hundred ten to one hundred twenty five dollars per barrel.