US Seeks to Cool Oil Prices Ahead of Midterms; Dips Likely Brief

Diplomacy May Temper Crude, but Supply Strains Keep Prices Elevated

Talks with Iran could trigger a brief pullback, but a tight physical market limits the scope for lasting relief.

Election-year diplomacy meets a strained oil market

The US-Iran standoff has not escalated into full military conflict, but crude prices remain high. Dated Brent has held above $120 a barrel for six weeks, while West Texas Intermediate (WTI) gained 10% in October and was up about 75% year to date, according to the analyst’s assessment. Prices have at times approached $120, with refined products trading even higher.

A meeting in Tehran involving officials from Saudi Arabia, Pakistan and Turkey points to regional efforts to ease tensions. The White House has leaned on these channels ahead of the midterms. Such diplomacy can influence expectations quickly: headlines suggesting progress may prompt traders to price in a lower risk of disruption. But negotiations do not themselves restore barrels to the market, so any price response will depend on whether physical flows improve.

Hormuz flows remain below pre-war levels

Oil flows through the Strait of Hormuz have averaged around 14 million barrels a day in October, compared with about 19 million barrels a day before the conflict. US Energy Secretary Wright said Persian Gulf flows had recovered to roughly 80% of pre-war levels, a meaningful improvement that still leaves a substantial shortfall. Attacks on ships in the strait were at their highest level of the period in October, while flows eased over the past week.

The disruption is also visible in oil held at sea. Crude on tankers stationary for at least seven days rose 8% week on week to 87.42 million barrels in the week ended October 23. Global floating crude inventories, by contrast, fell 1.8% to 614.1 million barrels over the same week, moving from a surplus of 5.3 million barrels to a deficit of 7.2 million. Together, these indicators suggest the market has limited room to absorb another supply shock.

Demand recovery complicates the route to lower prices

Demand is returning as supply remains constrained. China’s latest seven-day average crude imports reached 10.5 million barrels a day, moving towards the January-February average of 11.4 million. India’s net crude and product imports have recently been about 600,000 barrels a day higher year on year, while US demand is also showing signs of recovery.

For India, sustained high crude prices could add pressure to energy-import costs, while elevated product prices may also matter for businesses that rely on fuel. These are potential effects rather than a forecast of specific changes in inflation or company earnings; the source does not quantify either. The broader point is that diplomacy would need to translate into steadier shipments to ease the market’s physical tightness.

Refiners face cost pressure even if crude retreats

Higher freight costs are widening crude differentials as trade routes shift. That supports refined-product prices but can squeeze refiners’ net margins. Throughput has eased recently in the US, Japan and China, partly because delivering crude to Asian refiners has become more expensive. China’s state-owned refinery run rate was 7.3 percentage points below the same week in 2025; Shandong independent refiners operated at 50.7% in the week to October 23, down from 51% a week earlier.

The analyst expects volatility to increase over the 10 trading sessions before the election. Diplomatic headlines could pull Brent towards $105 and WTI towards $95, but those levels are presented as possible short-term moves, not a change in the underlying outlook. Imran maintains a Brent target of $120 a barrel. The assessment also points to an extended diesel and gasoil squeeze, with the IEA expecting it to continue into the middle of next year; delayed US refinery maintenance planned for the second quarter of 2027 could add further upward pressure.

Key Highlights

• Hormuz oil flows are around 14 million barrels a day, below pre-war levels of about 19 million.
• Brent has remained above $120 a barrel for six weeks, while WTI rose about 75% year to date.
• China’s crude imports are recovering, and India’s net crude and product imports have been running higher year on year.
• Elevated freight costs and product prices are weighing on refinery economics and operating rates.
• The analyst sees possible election-related dips as temporary and maintains a $120-a-barrel Brent target.

Investor Note: Treat diplomatic headlines as a potential source of near-term volatility, not proof that supply risks have cleared. Investors should weigh the analyst’s price outlook against actual shipping flows, inventory trends and the possibility that high crude and product costs could persist.