Crude oil prices plummeted by more than 4% on Thursday, as bullish sentiment evaporated like a bubble.
The market's tension eased after US President Trump temporarily halted military action in response to the protests in Iran, leading to a sharp decline in oil prices. Prices retreated over $3 from their highs, wiping out half of the geopolitical premium injected into crude over recent trading sessions. Trump stated on Wednesday that, to his knowledge, the suppression and killings during Iran's domestic protests had largely ceased, and no large-scale executions were currently planned. This statement significantly reduced market expectations of a potential US military strike against Iran. Reports indicated that the security alert level at the US Al Udeid Air Base in Qatar, which was raised on Wednesday, had been downgraded. However, other reports suggested at least one US aircraft carrier was moving towards the Middle East, indicating a continued US military buildup in the region. The US military is reportedly developing a range of response plans targeting Iran. Additional reports claimed that Israeli Prime Minister Netanyahu requested Trump to delay action to allow Israel more time to prepare for potential retaliation. Furthermore, Israel reportedly views the current US plan—targeting Iran's security forces—as insufficient to effectively destabilize the regime. This implies that Trump's decision to postpone strikes may be partly due to inadequate preparation, suggesting that Middle East geopolitical risks remain unresolved.
High-frequency data further confirmed increasing oversupply pressures in the crude oil market. Without the drive from geopolitics, oil prices struggle to maintain their strength. If the situation in Iran continues to de-escalate, market focus will shift back to the supply glut, potentially pushing prices into a renewed downtrend. Currently, the geopolitical situation has merely cooled rather than been resolved, and developments in Iran will remain a key factor influencing oil price movements. It is advisable to look for selling opportunities on rallies, prioritizing risk management in the current phase before capitalizing on opportunities, while carefully monitoring market rhythms.
Daily Market Movements WTI crude futures fell by $2.83, or 4.56%, to settle at $59.19 per barrel; Brent crude futures dropped $2.76, or 4.15%, to settle at $63.76 per barrel; INE crude futures declined 2.34% to close at 441.8 yuan.
The US dollar index rose 0.17% to 99.35; the Hong Kong Exchange's USD/CNY rate fell 0.05% to 6.947; the US ten-year Treasury yield increased 0.26% to 112.5; and the Dow Jones Industrial Average gained 0.6% to close at 49,442.44.
Recent Key Developments Iranian Foreign Minister Araghchi stated on the 14th to US media that the Trump administration should not repeat the mistake of bombing Iranian nuclear facilities from June of last year, emphasizing Iran's willingness to negotiate and urging the US to choose diplomacy over war. In a video interview with Fox News, when asked what message he had for President Trump, Araghchi said, "My message is not to repeat the mistake of June. You destroyed facilities and equipment then, but you cannot bomb away our technology and determination." He added that Iran has demonstrated a willingness to negotiate multiple times over the past 20 years, but the US has repeatedly withdrawn from talks and severed diplomatic channels, opting for war instead. Regarding the domestic situation, Araghchi claimed Iran is "now calm" and the government has "complete control" of the situation.
According to Axios, citing five informed US, Israeli, and Arab sources, President Trump is delaying a decision on striking Iran as the White House consults internally and with allies. Reports indicate that Israeli Prime Minister Netanyahu asked Trump to postpone action to allow Israel more time to prepare for potential retaliation. Additionally, Israel views the current US plan—targeting Iran's security forces—as insufficient to effectively destabilize the regime. Sources noted that Netanyahu has been very cautious over the past two weeks, avoiding any appearance of "pushing" Trump into action. Israel's stance is reportedly, "We will follow your lead, but we will not add fuel to the fire." US sources stated that Trump remains open to diplomatic engagement with Iran but wants a clear commitment from Iranian leadership that a serious agreement is possible. One source commented, "Trump does not believe anyone inside Iran besides Khamenei has real negotiating authority."
India's imports of Russian crude oil continue to decline, shifting under US pressure to more expensive crude from other regions. Shipping tracking data and informed sources suggest India's purchases of Russian crude this month may stabilize or even decline, potentially leaving more Russian oil stranded at sea. This follows a drop in India's Russian crude imports in December to a three-year low, down by approximately one-third from the peak in June of last year. For months, the Trump administration has accused India of "supporting Putin" by buying Russian oil and imposed a 50% punitive tariff on India earlier this year. Bilateral trade talks have yet to yield an agreement, and the US is reportedly considering a sanctions bill that would penalize countries purchasing Russian oil and gas products. Against this backdrop, Indian refiners are actively adjusting their procurement mix, increasing imports of alternative crudes from the Middle East, West Africa, and Latin America, despite their higher prices. Recently, Indian Oil Corporation made a rare purchase of Ecuadorian crude. Furthermore, sources indicate that refiners have not yet made formal offers for Venezuelan crude, awaiting confirmation that such purchases would not violate international sanctions.
Intertwined risks and underlying oversupply create a complex "fork in the road" dilemma for the crude oil market. Simultaneous escalations in geopolitical tensions in Venezuela, Iran, and the Black Sea region pushed oil prices to three-month highs, creating a complex environment for traders even as a significant supply surplus looms. Brent crude opened the year around $61 per barrel but fell below $60 after Trump's tariff remarks sparked market concerns, reflecting expectations of a rapid restoration of Venezuela's oil production and exports by the US. As details of the US plan gradually emerged, market pessimism eased. Subsequently, the Iran situation and Trump's tariff comments helped prices rally 9% within a week, touching a three-month high above $66 per barrel on Wednesday. Although prices retreated to around $64 on Thursday, the long-term possibility of a regime change in Tehran adds potential supply to the market, while short-term risks lie in potential supply disruptions within an already volatile environment. On Tuesday, two tankers were attacked by drones in the Black Sea near a Russian port, increasing the risk of further oil supplies being drawn into the conflict. By 2025, combined oil exports from Venezuela, Iran, and the Black Sea region could reach 4.6 million barrels per day, accounting for approximately 4.5% of global supply—a figure traders cannot ignore. Among all geopolitical risks, Iran remains the largest threat, particularly as conflict could endanger shipping through the Strait of Hormuz, which handles nearly 20% of global oil and gas transit. However, despite significant volatility over the past week, oil prices remain within a narrow range observed for months, primarily because global crude supply appears to be increasing substantially. The US Energy Information Administration forecasts global inventories will grow by an average of 2.8 million barrels per day in 2026. Data from analytics firms show that the volume of oil being transported by tankers has recently surged to around 1.3 billion barrels, the highest since mid-2020, which typically signals oversupply. Currently, about a quarter of the oil in transit originates from sanctioned countries, meaning these supplies take longer to find buyers. Further complicating the picture, the Brent crude forward curve recently shifted into a contango structure, which contrasts with signals of potential oversupply in the physical market. This divergence may reflect opacity surrounding the "shadow fleet" and Chinese inventories, but traders must also speculate on the potential outcomes of complex political situations in the three key producing regions and their possible impact on supply.
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