January 29th is set to leave a mark on financial markets, witnessing severe volatility across the board in gold, silver, copper, oil, and also US stocks and cryptocurrencies. This represents a significant release of accumulated risks following a sustained rally. During the night session, SC crude oil surged to limit-up, a sight not seen for a long time. The subsequent plunge of nearly 6%, accompanied by rapid position reduction, reflects investor panic in the face of extreme market conditions. WTI crude oil touched $66, while Brent crude breached the $70 mark for the first time since last September, with escalating sentiment driving the accelerated price surge. In less than a month, the geopolitical-driven speculative rebound has pushed oil prices up by over $10. Measured from the lows of last December, the rebound totals $12, marking the strongest performance for crude oil in over half a year. Undoubtedly, this is an unexpectedly strong rebound, particularly the rapid, consecutive surges starting last Friday, driven by a confluence of multiple bullish factors that have significantly improved market expectations. Thursday afternoon's transactions in the Middle East physical market indicated loose supply. According to survey data, the world's largest oil exporter, Saudi Arabia, is expected to set the official selling price for its flagship Arab Light crude to Asia for March at a discount. This would be the first time it has priced at a discount since December 2020. If implemented, this would mark the fourth consecutive month of price cuts for Asia by Saudi Arabia, pushing Arab Light prices to their lowest level in over five years. This price adjustment reflects a shift in the current supply-demand balance. Following OPEC+'s gradual production increases starting April 2025, supply additions have been significant, making Middle Eastern oil prices the weakest performing region globally recently. However, this has not exerted sustained pressure on oil prices. The fundamental picture isn't that robust; in fact, it remains somewhat soft. However, overall commodity sentiment is highly elevated, with continuous hot topics creating an optimistic atmosphere. Furthermore, unresolved geopolitical factors have largely offset concerns about a crude oil supply glut. Although oil prices experienced sharp volatility on Thursday, the prompt time spreads continued to strengthen rapidly, indicating rising market concerns about near-term geopolitical risks. Nevertheless, considering the oil price rebound has already reached $10, exceeding expectations, any subsequent cooling of commodity market sentiment could lead to a significant correction for oil, given the overall loose supply. At current levels, the risk-reward ratio for further chasing the rally is becoming less favorable, with clear signs of overheating in the market. The Shanghai Futures Exchange recently issued an announcement noting that recent international developments are complex and volatile, with increasing uncertain and unpredictable factors affecting market operations, leading to large price swings. With the Spring Festival approaching, it advised investors to further enhance risk awareness and invest rationally. Judging from recent intraday volatility, market sentiment is unstable, and the market is in a phase of high fluctuation, requiring careful attention to timing. WTI crude oil futures rose by $2.21, or 3.5%, to settle at $65.42 per barrel; Brent crude oil futures rose by $2.22, or 3.3%, to settle at $69.59 per barrel; INE crude oil futures rose by 2.98% to close at 480.9 yuan. The US Dollar Index fell by 0.2% to 96.16; the Hong Kong Exchange USD/CNY rate rose by 0.02% to 6.9255; the US 10-year Treasury yield was unchanged at 111.7; the Dow Jones Industrial Average rose by 0.11% to 49,071.56. Trump: Putin Agrees to One-Week Ceasefire. US Presidential Envoy Witkov, speaking on the Russia-Ukraine issue, stated that significant progress has been made and negotiations will continue in about a week, with the security and prosperity agreement largely complete. US President Trump stated that, given record-breaking severe cold, he has asked Russian President Putin not to open fire, parties are discussing territorial issues, and President Putin has agreed to a one-week ceasefire. Venezuela's Oil and Gas Reform Receives US Policy Response; US Issues Operating Licenses, Easing Sanctions. 1. The Trump administration recently issued a general license significantly expanding the operating permissions for US oil companies in Venezuela. The license covers crude oil export, sale, storage, promotion, and related transport logistics services, marking an important step by the US to proactively ease energy sanctions on Venezuela following changes in its political landscape. 2. This move closely follows the Venezuelan legislature's approval of historic oil and gas policy reforms. The legal adjustments aim to optimize the energy investment environment, with some US oil company executives viewing such reforms as a key prerequisite for resuming operations in the country. 3. The policy synchronization indicates the US is using licensing tools to interact with Venezuela's domestic reforms, creating compliant space for US energy companies to participate in the local market while maintaining its policy objectives towards Venezuela. This development could impact the recovery of Venezuela's crude production capacity and the global energy supply landscape. Saudi Arabia May Cut Flagship Crude OSP for First Time in Four Years, Reflecting Loose Supply-Demand Balance. 1. The world's largest oil exporter, Saudi Arabia, is expected to set the official selling price for its flagship Arab Light crude to Asia for March at a discount, the first time it has priced at a discount since December 2020. According to a survey of six Asian refiners, the price might be cut by 50-85 cents per barrel compared to last month, resulting in a discount of 20-55 cents to the Oman/Dubai benchmark average. 2. If implemented, this would mark Saudi Arabia's fourth consecutive monthly price cut for Asia, pushing Arab Light prices to their lowest level in over five years. Market analysis suggests the price adjustment reflects a shift in the supply-demand balance: the Dubai market has shifted into a contango structure since early 2026, indicating relatively weak prompt crude demand. 3. The main reasons for the loose supply-demand balance are OPEC+'s gradual production increases since April 2025, which have cumulatively released approximately 2.9 million barrels per day of capacity into the market, coupled with production growth from the US, Guyana, Brazil, and other producers. The International Energy Agency predicts global oil supply will exceed demand by 4.25 million barrels per day in Q1 2026. 4. However, some respondents noted the price cut might be smaller than expected, as Asian demand for Saudi crude has picked up after consecutive price reductions, and Indian refiners are replacing some Russian supply with Middle Eastern crude. Saudi OSPs are typically announced around the 5th of each month, and their pricing trend influences about 9 million barrels per day of crude oil priced for Asia by Iran, Kuwait, Iraq, and others. Geopolitical Storm Hits Oil Market, Brent Breaches $70, Supply Glut Narrative Temporarily Recedes. 1. Brent crude futures prices broke through the key psychological barrier of $70 per barrel for the first time since last September. 2. The immediate catalyst for this oil price strength is a sudden escalation in geopolitical tensions, with the US President warning Iran on social media to reach a nuclear deal or face military strikes. 3. The US President explicitly stated that US warships dispatched to the region are prepared to act swiftly and forcefully if necessary. 4. This tough rhetoric heightened market concerns about potential supply disruptions from a critical global oil-producing region, thereby increasing risk premiums. 5. The oil price rally this year actually runs counter to the widespread consensus at the start of the year that "severe oversupply would suppress prices." 6. The core logic supporting oil prices has shifted from supply-demand fundamentals to complex geopolitical risks. 7. Risk points are not limited to Iran but also include tensions or potential supply disruptions in other producing nations like Venezuela and Kazakhstan. 8. These factors collectively offset market worries about oversupply, shifting focus instead to supply fragility and potential shortages. 9. This indicates that during periods of high political risk, geopolitical factors can exert far greater short-term influence on oil prices than pure supply-demand data.
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