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Market Outlook
Thursday saw oil prices stage another round-trip, with geopolitical concerns overshadowing other factors and pulling crude sharply back from lows late at night.
This week, oil prices formed a high-level platform seesaw pattern. This rhythm stemmed from repeated back-and-forth on the geopolitical front. Iran's tough stance has made it seem difficult for US-Iran talks to achieve a breakthrough. Trump, while stressing that the Iran war would end soon, said the United States must attack Iran to prevent it from obtaining nuclear weapons. Iranian Parliament Speaker Ghalibaf emphasized that Iran's conditions have been clearly communicated to mediators many times. The carrot-and-stick approach has no effect on Iran. Progress can only be made after all seven of Iran's conditions are agreed upon. The Houthi armed group continues to strike Saudi energy facilities, and the geopolitical situation still maintains a high risk premium, further increasing the market's wait-and-see sentiment. Before a decisive driving factor emerges on the geopolitical front, funds will maintain a short-term trading approach.
Currently, both bulls and bears in the crude oil market have strong logical footholds. Judging from oil price performance in October, there is no doubt that the bullish side has greater energy. The bullish side rests on core logic including the risk of geopolitical escalation, unabated heat in the refined products market, and the fragility of crude oil supply. In particular, concerns driven by geopolitical disruption have overshadowed the clear improvement in the crude oil market's supply-demand structure since September. The market worries that if geopolitics escalates again, inventories that have already been drawn down for half a year will struggle to buffer the risk of another supply disruption. This has led the market to continuously price in potential geopolitical risk premiums, pushing oil prices higher. On the bearish side, observers note that since July, crude oil market supply has shifted from a clear shortage to a tight supply-demand balance, and even slight oversupply pressure. During this period, despite the backdrop of the strait blockade, Houthi strikes on Saudi energy facilities, and Iran's continuous attacks on vessels around the strait, Middle East oil exports have still maintained sufficient resilience. This is far from the situation before July when supply could easily be disrupted and sharply decline. The market is improving the supply-demand situation through its own super-strong repair capacity, but these factors have not been fully priced in over the past period. The market is more worried about geopolitical risk. Geopolitical risk is right in front of us, and what is unsettling is the uncertainty. The market fears the impact on the crude oil market if a US-Iran military conflict breaks out again, making the high geopolitical premium difficult to fade.
This week, the physical market continued its weak pattern. The crude oil market's own high-frequency indicators, including monthly spreads and refined product cracking spreads, have also shown weakness recently. The situation facing the crude oil market remains complex. Ultimately, the direction of oil prices still depends on geopolitical developments. Participate cautiously and pay attention to risk control.
Daily Updates
[1] WTI front-month crude oil futures fell $0.78, or 0.76%, to $102 per barrel; Brent front-month crude oil futures fell $0.84, or 0.75%, to $110.8 per barrel; INE crude oil futures fell 1.96% to 721.5 yuan.
[2] The US dollar index fell 0.25% to 101.89; the Hong Kong Exchange's USD/CNY fell 0.06% to 6.6377; US 10-year Treasury bonds rose 0.53% to 106.53; the Dow Jones Industrial Average fell 0.25% to 52,342.56.
Recent News
[1] Brazil's Petrobras posted record third-quarter output, with refineries near full capacity. 1. Petrobras disclosed in a filing that third-quarter sales of oil, natural gas, and their derivatives were 3.5 million barrels per day, up 5.3% quarter-on-quarter, a record high. Exports of oil and its derivatives were 1.3 million barrels per day. Domestic oil production in Brazil was 2.8 million barrels per day. The company said the accelerated commissioning of new platforms in deepwater fields was the main driver, including the P-78 and P-79 units in the Buzios project. 2. During the same period, Petrobras ran its refineries near full capacity, helping Brazil buffer the impact of the Iran war on the global energy market.
[2] US media: Trump considers military action against Iran after midterm elections. According to US financial media Semafor, US President Trump appears willing to give diplomatic efforts with Iran another chance, but at the same time, he is also seriously considering further military strikes after the elections. A US government official revealed that the Trump administration is currently negotiating a temporary peace agreement, but the agreement still faces many obstacles before progress can be made. Trump confirmed that Vice President Vance had sent a letter to Iran in an attempt to restart peace talks, but Trump downplayed the move, suggesting it was mainly to meet humanitarian needs. The government official said that if diplomatic efforts fail, the United States is prepared to resume military action shortly after the midterm elections, adding: "It only takes an order from the president." Many within the government are skeptical about resuming military action against Iran. The official said that on the issue of escalating military action, Trump is the "most open-minded" person, but even so, he still has concerns.
[3] European natural gas benchmark price broke above 100 euros for the first time in nearly 4 years. European natural gas prices continued to rise on the 28th. The Dutch Title Transfer Facility (TTF) natural gas November futures price, the benchmark for European natural gas, broke above 100 euros per megawatt-hour during intraday trading that day, the first time since December 2022. Market data showed that the TTF natural gas November futures price rose to 100.75 euros per megawatt-hour at one point during the day. Since the beginning of this month, the European natural gas benchmark price has accumulated a gain of about 40%. Data from Gas Infrastructure Europe showed that as of October 26, gas storage facilities in the EU were about 74.9% of total capacity, significantly lower than the same period in previous years. Among them, gas storage rates in Germany and the Netherlands were about 61.7% and 65.5%, respectively. As the winter heating season arrives, pressure on Europe's natural gas supply has further increased. Market analysts believe that the ongoing Middle East conflict continues to disrupt liquefied natural gas exports from the Gulf region, and the market fears that the Middle East situation may further escalate, leading to a continued reduction in natural gas supply in the region. At the same time, weather forecasts show that parts of Europe and Asia may experience colder weather this winter than in previous years, putting upward pressure on heating gas demand. Currently, European natural gas inventories are at a low level, and multiple factors combined may further push up natural gas prices. Sina partner platform futures account opening, safe, fast, and guaranteed.
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