Oil Prices Continue to Fall as Democratic Sweep Shakes Energy Markets

Crude oil prices moved even lower, and energy company stocks followed after the results of the U.S. midterms, as markets brace for a potentially radical change in U.S. policies.

At the time of writing, Brent crude was trading at $94.30 per barrel, after dropping by 9% on Wednesday, and West Texas Intermediate was trading at $87.35 per barrel, after shedding 8% on Wednesday, following the Democrats’ majority in both houses.

The S&P Energy index was down by 4.77% as of the time of writing, to 976.18, on expectations of a shift in U.S. foreign policy, and energy policy, too. The expectations on the latter were driven by the landslide victories of Democrat candidates in Texas and Georgia, after they ran on platforms featuring opposition to new data center construction. Data centers have been the focus of natural gas demand projections over both the short and long term.

While limiting new data center construction may be relatively easy, ending the war with Iran might prove a lot trickier. As suggested by the latest moves in oil and energy stocks, hopes are running high, but some analysts have warned the election results might in fact push President Trump closer to choosing escalation instead of de-escalation. Such a development would aggravate the energy security situation globally.

“If Tehran recognises that Trump needs a deal, but not just any deal, a genuine opportunity could emerge to end the war. But if it interprets the results as evidence that American resolve has weakened, it could instead encourage him to launch a new military escalation,” the president of the Abu Dhabi-based Emirates Policy Center, Ebtesam al-Ketbi, said, as quoted by Reuters.

The publication reported, citing unnamed Iranian officials, that Tehran “remained on high alert”, expecting an escalation from Trump to make up for the election loss.

By Irina Slav for Oilprice.com