(Nov 2) : Oil dropped ahead of Tuesday’s US midterm elections despite fresh attacks on vessels around the Strait of Hormuz and Iranian threats to broaden retaliation if the US renews strikes.

Brent slipped below US$112 a barrel after jumping more than 2% on Friday, while West Texas Intermediate was around US$102. US Secretary of State Marco Rubio said no decision had been made on fresh strikes and that President Donald Trump prefers a diplomatic resolution to the eight-month conflict. 

The global benchmark rallied in October, hitting a six-month high despite a revival of crude flows through Hormuz. While the US President said last week that peace talks were underway, he has repeatedly threatened to resume strikes on Iran after the midterms. On Thursday, a top commander briefed Trump on military options, the Wall Street Journal reported.

Still, Iran’s Supreme Leader Mojtaba Khamenei ordered his top military commanders to prepare for renewed confrontation with the US and Israel, even has his top diplomat signaled progress in diplomatic talks. 

On Sunday, UK Maritime Trade Operations said it received a report of a ship being struck in Hormuz by a projectile, which followed an attack on a liquefied natural gas tanker on Friday. Vessels have been transiting the waterway with their transponders off to avoid detection.

Against that backdrop, OPEC+ agreed over the weekend to keep output quotas unchanged in December after unwinding the last of its voluntary cuts in September. The move is largely symbolic, given that hostilities in the Middle East, including in the Red Sea, continue to threaten exports and production facilities.

Uploaded by Isabelle Francis