Brent drops to $102/bbl on Democratic sweep in the US midterms

Democrats have won control of both chambers of Congress: the AP called the Senate for them late on Tuesday night and the House early on Wednesday morning. The party flipped seven Senate seats: Iowa, Kansas, Ohio, Maine, North Carolina, South Carolina and Texas. Trump has admitted the Iran war was partly responsible for the Republicans' midterm defeat. The vote also clears the way for a possible US decision on Iran, with US media reporting that Central Command had prepared plans for strikes that could begin as early as Wednesday, after the midterms, when three American aircraft carriers would be in the region. In the strait, the IRGC said four oil tankers were destroyed after hitting naval mines on a route it had declared prohibited, south of Hormuz, and that they remained ablaze. Separately, an Iranian lawmaker, Amir Hayat-Moghaddam of parliament's national security committee, said vessels from India, China, Iraq and Qatar could pass through the strait freely, though Indian and Chinese ships would still pay transit fees; no official confirmation has been made. Talks are still alive, with Qatari mediators expecting both sides to respond within 36 hours to a new proposal, according to Reuters. Shipping data shows the strait isn't fully shut: October crossings were the highest since July, supported by dry-bulk and LNG movements, though VLCC traffic declined. Finally, the Jan/Feb’27 and Jan/Jul’27 Brent futures spreads are at $2.55/bbl and $12.10/bbl, respectively.

This morning the prompt leads the Dated complex lower. Nov'26 DFL slid from $1.91/bbl to $1.25/bbl, and balmo/Dec'26 DFL softened from -$2.15/bbl to -$2.25/bbl in 220 lots. Dec'26 DFL came off from $4.17/bbl to $3.45/bbl, with size going through at $4.05/bbl on the way, around 80c under last night’s close, and Jan'27 DFL followed from $3.60/bbl to $3.25/bbl. Dec/Jan'27 DFL traded 0.40 in size, nearly 30c under last night, and was last seen at $0.20/bbl, while Dec/Jan'27 Dated came off from $2.60/bbl to $2.46/bbl. Nov'26 Dated eased from $105.93/bbl to $104.42/bbl. In Dubai, Dec'26 Dated/Dubai was bid up from a 2.80 low to $3.00/bbl, still around 35c under last night’s close, and Jan'27 Dated/Dubai traded 2.25 in size. Further out, May/Jun'27 28 DFL traded 0.04 in 900 lots.

In the days market, we saw daily DFL 12-18 Nov'26 trading 1.65, 09-13 v 23-27 Nov'26 going through at -$1.65/bbl, some 80c weaker than last night, and $21.00/bbl-24 Dec'26 trading 2.05 against Jan'27 and $0.55/bbl against 29-31 Dec'26, while 05 Nov'26 v 12 Nov'26 was sold down from -$0.50/bbl to -$0.60/bbl.

Sing 0.5 continued to aggressively sell off this morning though it rebounded somewhat post window, contrastingly Euro 0.5 was better bid this morning. Dec/Jan'27 Sing gapped down from $27.00/mt to $23.00/mt before rebounding back to $25.50/mt, Jan/Feb'27 sold off $2.50/mt to $19.50/mt and was then bid back up to $21.50/mt. Dec'26 Sing crack saw large volume this morning, it opened 20c lower at $17.20/bbl and was aggressively offered down on screen bottoming out at $14.65/bbl in the window, the interest then turned buyside and it was bid back up to $16.20/bbl, Dec'26 0.5 E/W has traded around $18.00/mt lower from yesterdays close to $103.00/mt due to a combination of Sing crack weakness and Euro crack buying. Euro complex was slightly better today, spreads were better bid with Dec/Jan'27 trading up a dollar to $15.00/mt and Jan/Feb'27 from $9.75/mt to $10.50/mt, Dec'26 Euro crack saw real buying from -$1.50/bbl to -$0.20/bbl.

380 cracks saw real selling this morning, with Dec'26 crack trading down from $1.60/bbl to $0.80/bbl by window start, it was at $0.00/bbl by the end of the window and has sold down to -$0.30/bbl post window. Spreads were also better offered with Dec/Jan'27 selling down from $34.00/mt to $31.00/mt, and Jan/Feb'27 from $22.00/mt to $17.75/mt. Barge complex remained thin this morning, spreads have yet to really trade while Dec'26 Barge crack has been better bid trading up from -$14.05/bbl to -$13.75/bbl.

This morning in distillates, Sing gasoil spreads were more offer side initially, with Feb/Mar trading down to $4.00/bbl, while kero spreads were also offered, with Mar/Jun trading at $11.80/bbl. E/W sold off early on, getting hit down to -$105/mt before turning bid post window and up to -$100/mt. Prompt ICE gasoil spreads were rangebound, with Dec/Jan weakening to $41.50/mt before firming back to $44.00/mt, while Jan futures cracks firmed to $73.30/bbl.

This morning in naphtha, the Nov/Dec MOC roll was bid, with Dec outright buying end-window, despite aggressive selling in MOPJ spreads and front cracks. MOPJ Q2 cracks opened at -$3.25/bbl versus -$2.86/bbl last night on propane weakness before recovering towards -$3/bbl; balmo traded at $3.60/bbl and was valued nearer $4/bbl, still down $1.20/bbl from close, while Jan traded at $1.95/bbl end-window. Spreads softened, with Dec/Jan sold down to $30/mt, bal Nov/Dec from $35/t to $33/t and Jan/Feb from $30.75/t to $30/t. Dec E/W fell from $73/mt last night to $70/mt, dipped to $69/mt and recovered to $70/mt; Q1 traded at $54.50/mt, while Dec/Jan eased from $9.50/mt to $9/mt and Jan/Mar traded at $10.50/mt. NWE Dec cracks opened at -$4.70/bbl and fell to -$5.15/bbl on low liquidity before recovering to -$4.85/bbl. While Q1 eased to -$5.75/bbl. Spreads were slightly softer, with Dec/Jan moving from $21.50/mt to $21/mt versus $21.25/mt last night, while Jan/Apr traded at $71/mt and Dec/Dec at $195/mt.

This mornio $75.5/bbl.

This mornio $75.5/bbl.

This morning in NGLs, FEI liquidity was bad. Dec/Jan FEI traded at $57/mt and Dec/Dec FEI traded at $320/mt. There was initially DCE flat price buying this morning with May FEI trading $700/mt multiple times. Dec FEI saw Phys selling in the MOC window selling down to $643/mt before finding some bids and rebounding up to $695/mt to close.

FEI/MOPJs were firm today as Q2 FEI/MOPJ traded at -$79/mt and -$78/mt. Dec FEI/MOPJ traded at $42/mt. FEI/CP was also firm with Dec FEI/CP trading at $289/mt and $288/mt. Q1 FEI/CP traded firm at $202/mt this morning.

CP spreads were slightly higher with Dec/Jan CP trading at $12/mt before stepping up to $13/mt printing. The Arb was illiquid with Dec Arb trading at -$359/mt and -$360/mt before printing to -$357/mt on screen. This was lower than yesterday’s close at -$353/t while prems were down slightly off FEI selling in the window.

The Fed held rates at 3.75% to 4% in a 10-2

Markets enter the week on the back foot following Friday’s broad risk-off move, with equities, commodities and crypto under pressure, although FX remains surprisingly contained.

US Treasuries are broadly unchanged ahead of a pivotal week. Wednesday’s quarterly refunding announcement could deliver the biggest change to issuance guidance since early 2024, while Friday’s NFP is expected to show just 65k jobs, with unemployment steady at 4.2%. Tuesday’s midterms add another layer of event risk, with a potential split Congress historically supportive of Treasuries. Meanwhile, Dallas Fed's Logan believes rates need to be at least 50bp higher to become modestly restrictive.

UK-EU relations are back in focus, with renewed discussion around potential UK re-entry and regulatory alignment. France's fiscal concerns are mounting, with Fitch moving its outlook to negative on weaker growth, higher borrowing costs and a wider deficit.

The BOJ held at 1.25% in a hawkish decision, keeping December as the central case for a 25bp hike. USD/JPY is back near 158.00, with intervention warnings continuing. Australia is firmly in focus ahead of tomorrow's RBA decision, with 32/35 economists expecting a 25bp hike to 4.85% as inflation reaches 4.9% y/y. China delivered mixed signals. RatingDog manufacturing PMI held at 52.0, but official PMI fell to 49.3, back in contraction. Regulatory support helped Chinese equities rebound, while South Korea's KOSPI gained 3.0% on strong exports.

Week Ahead:
Monday: US ISM Manufacturing PMI
Tuesday: US JOLTs Job openings, RBA Interest Rate Decision
Wednesday: US ISM Services PMI
Thursday: BoE Interest Rate Decision
Friday: US Non-Farm Payrolls, US Unemployment Rate, US Michigan Consumer Sentiment
Saturday: China Inflation Rate YoY