By Siyi Liu and Sam Li
SINGAPORE, Nov 5 (Reuters) - Brent crude futures rose on Thursday as investors weighed the risk of a further escalation of the US-Israeli war with Iran after the losses suffered by US President Donald Trump's Republican Party in congressional elections this week.
Brent futures were up 34 cents, or 0.36%, at $94.96 a barrel as of 0825 GMT, while US West Texas Intermediate crude futures were down 27 cents, or 0.31%, at $87.85 in choppy trade.
Both benchmarks tumbled by more than
8% in the previous session to settle at their lowest since August 31.
"Markets are assessing the impact of the midterm elections on Donald Trump's next steps with the Iran war, pricing in more likelihood for the war to end," said June Goh, senior oil analyst at Sparta Commodities.
"However, there will be more volatility ahead as the path to full diplomacy to end the war is still wrought with many unknowns while the global strategic reserves have drawn very thin."
Uncertainty remains before the Democratic-controlled Congress takes office in January, analysts said.
Citi said in a note there were concerns that with the midterms over, the White House could focus on its executive powers in foreign policy and potentially escalate conflict with Iran.
Eurasia Group lowered its estimate for the chance of renewed US strikes on Iran to 60% from 65%, but also cut the probability of a deal to 10% from 20%, as Iran has held firm on its demands and Trump was unlikely to accept terms seen as a defeat. It raised the likelihood of a continued standoff to 30% from 15%.
Despite the recent drop in oil prices, escalation is likely to produce a sharper increase into a band of $110 to $125 per barrel for Brent, Eurasia Group said in a note.
Meanwhile, Iran's Islamic Revolutionary Guard Corps said on Thursday that two oil tankers and a tugboat had caught fire in separate incidents after attempting to use unauthorised routes through the Strait of Hormuz.
Crude shipments through this key waterway for most Gulf oil supplies have recovered to close to pre-war levels, according to analysts, though at a higher cost.
The resumption of Gulf supply has pushed the global oil market back into surplus after months of disruption caused by the war, JPMorgan said in a note on Wednesday.
JPMorgan estimates the market returned to a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October, nearly matching last year's average of 1.3 million bpd.
Commercial oil inventories in major consuming countries are near their lowest in 15 years and Iran could emerge from the US election outcome with greater resolve, said Mukesh Sahdev, CEO of energy consultancy XAnalysts.
US crude, gasoline and distillate inventories all fell last week as demand hit its highest in a year, the Energy Information Administration said on Wednesday. [EIA/S]
(Reporting by Siyi Liu in Singapore; Editing by Christian Schmollinger, Kate Mayberry and Emelia Sithole-Matarise)
