Today, oil extended its biggest weekly drop since April 2020. Brent fell toward $97 per barrel after losing more than 16% last week; WTI is trading around $90. On October 30, Brent traded near $116, so the current price is the lowest since mid-month — Monday, November 2, closed at $104.77. The main bearish driver was the Democrats' victory in the US midterm elections: the market expects that a serious escalation of the conflict with Iran is now less likely.
Meanwhile, attacks in the region continue. One oil tanker was struck today by an unknown projectile while leaving the Strait of Hormuz, the UK maritime authority UKMTO reported. Iran-backed Yemeni Houthis damaged Saudi Aramco offices in Riyadh, after which Saudi forces destroyed two of their launchers. For the market, this remains the main risk: in the event of a new escalation, a significant part of last week's decline could quickly reverse. Short-position traders and oil-importing countries would lose from such a development, while exporters would benefit from higher per-barrel prices.
But the physical market explains why prices are falling. Despite frequent attacks on ships, oil exports from the Persian Gulf have returned to near pre-crisis levels, and OPEC production in October was 88% of February's output. Iran remains an exception because its output has fallen due to the US maritime blockade, and many see lifting that blockade as the key to a larger fall in oil prices. A new deal could push Brent down to the $70–$85 range, while the current price still contains a premium for the risk of new hostilities.
In the coming days, the market will receive three reference points: the US Energy Information Administration's monthly report on Tuesday, OPEC's report on Wednesday, and the International Energy Agency's review on Friday. All this suggests oil is, for now, moving toward diplomatic optimism, but the market remains fragile. I believe that in the next sessions, Brent will most likely trade around $95–$100 with high volatility, and a break below that range is only possible if real steps are taken to lift the blockade on Iran. If talks collapse or a new major incident occurs in the Strait of Hormuz, I expect a quick return to $105 and above, where the price was just a week ago.
As for the current technical picture, buyers need to take the immediate resistance at $92. That would allow targeting $95, above which it will be rather difficult to push through. The next higher target is the $98 area. If oil falls, bears will try to take control of $89. If they succeed, a break of that range would deliver a severe blow to long positions and drive oil down to a low of $87 with the prospect of reaching $84.
