Oil prices on Thursday rebounded from a steep decline, as investors continued to analyse the direction of the Iran conflict following the victory of Democrats in the US midterm elections.
Brent, the benchmark for two thirds of the world's oil, was up 2.47 per cent to $96.96 a barrel at 7.11pm UAE time, having gained more than 3 per cent earlier. West Texas Intermediate, the gauge that tracks US crude, rose 2.02 per cent to $89.90 per barrel.
Both retreated to their lowest levels in two months on Wednesday, with Brent briefly touching $93. Both have now pared their weekly losses to about 14 per cent.
With the Democratic Party taking control of the House of Representatives and the Senate in the US midterm elections, President Donald Trump's agenda around the Iran war remains uncertain.
Crude's decline after the US midterms offered some relief from months of elevated energy costs, but with no peace agreement between Washington and Tehran the market remains exposed to binary geopolitical risks, Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, wrote in a note.
That “leaves prices vulnerable to renewed volatility … while the recovery in Middle East crude exports has yet to be matched by a similar improvement in refined fuel supplies”, he said.
Tension in the Middle East continues to simmer. On Thursday, Iran's navy said an oil tanker in an area east of the Strait of Hormuz struck a mine and caught fire, and accused the ship of breaching regulations by operating in an “unsafe zone”.
Meanwhile, Saudi Arabia continues to face missile attacks by Yemen's Houthi rebels.
Iranian Foreign Minister Abbas Araghchi held separate telephone calls with his Saudi and Qatari counterparts, Prince Faisal bin Farhan and Sheikh Mohammed bin Abdulrahman, to discuss regional developments and the latest diplomatic efforts aimed at establishing stability, the Tasnim news agency reported.
Paul Donovan, chief economist at UBS Global Wealth Management, told The National that oil has further to fall once the fighting is over.
“I think we’re looking at, as it were, a fundamental fair value for the oil price is probably around $80, $85 a barrel, something like that,” he said. “That’s where we probably settle … in a postwar environment.”
