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Morning Oil Outlook: Trump Rules Out Iran Strikes Before the Midterms, and Oil Cools Off Oil

Jeff Showalter

— 3 min read
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Morning Oil Outlook: Trump Rules Out Iran Strikes Before the Midterms, and Oil Cools Off Oil

Oil gave back some of Thursday’s big jump overnight. President Trump said the U.S. won’t attack Iran before the November 3 midterms, and traders took him at his word, at least for now. Brent fell $1.68 to $102.60 a barrel before dawn Friday, a day after settling up 4.1%. Part of the war premium (the extra amount traders pay for the risk of lost supply) is coming back out of the price.

What Changed Overnight

On Thursday, Trump posted on Truth Social that “We are having productive discussions with the Islamic Republic of Iran.” He went further, saying “we will not be attacking Iran at any time prior to the Midterm Elections to be held in the United States on November 3rd.” The post came after media reports that a strike was on the table, the same reports that sent oil higher yesterday.

Tehran is weighing its next move. Iran’s Tasnim news agency said Foreign Minister Abbas Araqchi is reviewing the U.S. response to Iran’s plan to reopen the Strait of Hormuz within seven days. Trump, meanwhile, said the U.S. blockade remains in full force. And in a separate development, Reuters reported that China will restart refined fuel exports after its Golden Week holiday, which should take some pressure off a tight market.

Where Prices Stand

  • Brent (global benchmark): $102.60, down $1.68 (1.61%). Thursday’s settle: $104.28
  • WTI (U.S. benchmark): $90.18, down $1.31 (1.43%). Thursday’s settle: $91.49
  • U.S. diesel (AAA national average, Oct. 8): $6.2847 a gallon, down from $6.3895 a week ago

Despite the dip, Reuters said Brent is still headed for a weekly gain, while WTI looks set for a small weekly loss. Diesel is coming down, but drivers are still paying far more than the $3.6791 a gallon they paid a year ago.

Why the Calm May Not Last

Not everyone is buying the relief rally. PVM Oil Associates analyst Tamas Varga said “the escalation of atrocities in the Persian Gulf and around the Red Sea has dashed hopes” that the region’s export gains will hold. XS.com analyst Linh Tran was similarly cautious: “The prospect of easing tensions still needs to be reinforced by concrete progress in negotiations.” Washington also sanctioned 17 vessels carrying Iranian crude and fuel on Thursday. The pressure campaign isn’t letting up.

What to Watch Today

Hurricane Isaias.  According to the Marine Minerals Administration, as of Thursday, producers had shut in about 1.28 million barrels a day of Gulf of Mexico output. That’s 62.9% of the region’s production sitting idle.

Fox Weather said the Category 2 storm was packing 110 mph winds early Friday and is expected to strengthen before making landfall late Friday or early Saturday somewhere between Gulf Shores, Alabama, and Pensacola, Florida. How much the storm props up prices, Tran said, will come down to post-storm inspections and how quickly output comes back online.

Also on deck: Baker Hughes releases its weekly rig count this afternoon. The U.S. total slipped by one to 598 last week.

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