9% plunge in WTI as US election results fuel hopes of an end to Iran war

$90 gives way as WTI retreats. Traders assess how the US midterm elections could affect the Iran war.
Political pressure to end the war with Iran could intensify following the Democrats’ US midterm election victory.
An unexpected draw in US crude inventories fails to stem the steep sell-off in oil.

9% is the decline in West Texas Intermediate (WTI) on Wednesday. The immediate catalyst for the sell-off is unclear. One possible factor is the Democrats’ victory in the US midterm elections, which could increase pressure on President Donald Trump to end the war with Iran. The US crude benchmark is trading near $87 a barrel at the time of writing, a four-week low.

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With Democratic majorities in both the House and Senate, lawmakers could have greater scope to limit funding for the Iran war. “We will end the war,” said Senate Democratic Leader Chuck Schumer, who added that some Republicans had joined the effort.

After previously suggesting that attacks could restart following the elections, Trump said the US had no immediate plans to strike Iran. His comments also downplayed the prospect of imminent military action.

No decision has been reached on replacing Defense Secretary Pete Hegseth, although Trump is discussing the matter with advisers, CBS News reported. According to White House spokeswoman Anna Kelly, Trump “has full confidence in Secretary Hegseth.”

Diplomatic activity continues, but the outlook for negotiations remains uncertain. Qatari mediators travelled to Tehran on Monday evening to discuss a potential US-Iran agreement with Iranian Foreign Minister Abbas Araghchi, Reuters reported.

US crude oil stocks recorded a draw of 865K barrels last week, the Energy Information Administration (EIA) reported. That contrasts with forecasts for a 900K-barrel build and follows a decline of 1.462 million barrels the week before.

WTI Oil: Key Questions

WTI Oil Explained

Traded internationally, WTI oil takes its name from West Texas Intermediate. Alongside Brent and Dubai Crude, it is one of three major crude oil types. Its relatively low gravity earns it the description “light”, while its low sulphur content makes it “sweet”. These characteristics make WTI a high-quality oil that is easy to refine. Produced in the United States, it is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil market benchmark, with its price regularly cited by the media.

Key Drivers of WTI Oil Prices

Supply and demand determine WTI oil prices, as they do for other assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. Supply disruptions caused by political instability, war or sanctions can also affect prices. Another major influence is policy set by OPEC, the group of leading oil-producing countries. Because oil is traded mainly in US Dollars, the value of the US Dollar also matters: a weaker currency can make WTI crude oil more affordable, while a stronger one can make it less affordable.

Inventory Data and WTI Oil Prices

WTI oil prices respond to the weekly inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA). Stock movements indicate shifts in supply and demand. A draw can signal stronger demand and lift oil prices; a build can point to greater supply and weigh on prices. The API publishes its figures each Tuesday, followed by the EIA the next day. The two reports generally show similar results, with the figures within 1% of one another 75% of the time. As a government agency, the EIA is regarded as the more reliable source.

OPEC’s Role in WTI Oil Pricing

Production quotas agreed by OPEC (Organization of the Petroleum Exporting Countries) often affect WTI oil prices. The group comprises 12 oil-producing nations, which meet twice a year to set quotas collectively for member countries. Lower quotas can constrain supply and lift prices, while increased production has the reverse effect. The wider OPEC+ alliance adds ten non-OPEC members, of which Russia is the most notable.