DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

SECAUCUS, N.J. (DTN) -- Crude futures tumbled 8% Wednesday for its sharpest one-day loss in nearly seven months as large Democrat wins in U.S. midterm elections portended challenges to the Trump administration's war against Iran and other energy policies.

The third straight day of losses in WTI and Brent futures came despite lower weekly crude stockpiles reported by the U.S. Energy Information Administration (EIA), which also noted lower balances for gasoline and distillates.

NYMEX WTI crude for December delivery fell $7.97, or 8.29%, to settle at $88.12 bbl after a four-week low at $87.13. It was the U.S. crude benchmark's sharpest one day loss since April 17, when it settled at $83.85 bbl, down 11.45% on the day.

ICE Brent for January delivery dropped $8.98, or 8.67%, to $94.62 bbl. It was the global crude benchmark's lowest close since the Aug. 31 settlement of $90.49.

Downstream, ultra-low sulfur diesel (ULSD) for December delivery eased $0.3251, or 7.18%, to $4.2055 gallon. It hit a 12-week low of $4.1710 earlier.

RBOB for December delivery retreated by $0.2069, or 7.05%, to $2.7286 gallon. The intraday bottom of $2.7131 marked an eight-month low.

The U.S. Dollar Index slid 0.276 points to 101.450 against a basket of foreign currencies.

The selloff across energy futures came as control of Congress flipped to Democrats in Tuesday's, Nov. 3, midterm elections, with the party capturing at least 225 House seats to clear the 218-seat majority threshold while expanding its Senate majority to 54 seats.

Come January, Democratic lawmakers plan to invoke the War Powers Resolution to constrain U.S. President Donald Trump, demanding formal congressional approval for any continued armed engagement in the Strait of Hormuz following recent airstrikes he ordered on Iran's Qeshm Island.

Although the president maintains authority to launch short-term emergency military actions, Article I of the U.S. Constitution explicitly grants Congress the sole power to declare war.

"Trump can maintain U.S. sanctions on Iranian oil via executive order, but a Democratic-controlled Congress can also push for diplomatic de-escalation to secure commercial vessel transit through the Strait of Hormuz," said John Kilduff, partner at New York energy hedge fund Again Capital.

The Middle East diplomacy situation remains volatile as both Washington and Tehran weigh Qatari-brokered proposals to avoid an escalating regional war. Iranian officials, however, said significant ground remains to be covered before a deal, leaving open the threat of further attacks to energy-transporting vessels on the Strait of Hormuz.

On the U.S. inventory front, commercial crude oil stocks dropped by 900,000 bbl to 409.8 million bbl during the week ended Oct. 30, extending the previous week's decline.

U.S. emergency crude stockpiles stored under the Strategic Petroleum Reserve also fell, by 399,000 bbl to the lowest levels since 1982.

Distillate fuel inventories fell by 3.6 million bbl to 99.3 million bbl, their lowest level since the week ended May 2, 2003.

Gasoline inventories edged down by 200,000 bbl to 209 million bbl, reversing part of the previous week's 3.9 million bbl increase.

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