Oil prices fell for a fourth consecutive day on Thursday as investors weighed whether the US midterm election results could reduce the likelihood of further escalation in the war involving the United States, Israel and Iran. Brent crude futures were down 80 cents, or 0.85%, at $93.82 a barrel at 0426 GMT, while US West Texas Intermediate fell $1.20, or 1.36%, to $86.92. Both benchmarks had dropped more than 8% in the previous session, closing at their lowest levels since August 31.

Sources close to Gulf government circles said a weakened President Donald Trump, facing a Democratic-controlled Congress able to constrain his military options, may have greater incentive to pursue a deal. They viewed a full-scale assault on Iran as less likely. Sparta Commodities analyst June Goh said markets were pricing in a greater chance of the conflict ending, but cautioned that the route to diplomacy remained uncertain and global strategic reserves had become very thin.

Oil flows through the Strait of Hormuz, a key route for Gulf supplies, have recovered to near pre-war levels, analysts said, although shipments are now more costly. JPMorgan said the resumption of supply had returned the global oil market to surplus after months of disruption. It estimated a surplus of 1.1 million barrels per day in September, rising to 1.4 million bpd in October, close to last year's average of 1.3 million bpd.

The outlook remains uncertain ahead of the Democratic-controlled Congress taking office in January. Citi said the White House could turn to its executive foreign-policy powers after the midterms, potentially raising the risk of escalation. Eurasia Group lowered its estimate for renewed US strikes on Iran to 60% from 65%, but also reduced the probability of a deal to 10% from 20%. It raised the likelihood of a continued standoff to 30% from 15%.

Eurasia Group said an escalation could push Brent sharply higher, into a range of $110 to $125 a barrel. XAnalysts CEO Mukesh Sahdev pointed to commercial oil inventories in major consuming countries being near their lowest level in 15 years, and said Iran could emerge from the election outcome with greater resolve. Separately, the US Energy Information Administration reported that crude, gasoline and distillate inventories all fell last week as demand reached its highest level in a year.

Sources: Investing.com News.