Brent crude closed with a doji candlestick for a second consecutive day, while SC crude also continued to oscillate at elevated levels, with little change from the previous session. Whether to push higher again or retreat from here 鈥?the oil market has once more arrived at a crossroads requiring a decision, but the current influencing factors remain complex, and the signals they provide are far from clear. U.S. API crude inventories for the week ending October 9 showed a draw of 11.123 million barrels, far exceeding market expectations of a 1.9 million-barrel build and following a prior draw of 2.09 million barrels. Yet despite such a massive inventory decline, oil prices barely reacted 鈥?the lack of gains on bullish news suggests that funds are cautious about chasing the rally at current levels. The IEA warned that global diesel supply tightness will persist into next year. Although crude shipping has somewhat recovered recently, refined product exports from the Middle East remain slow to recover, and global diesel supply is expected to remain tight for an extended period next year. Additionally, the IEA downgraded its global oil demand forecast, now projecting a decline of 2.6 million barrels per day in 2026, compared with last month's forecast of a 2.5 million-barrel decline, and also significantly lowered its 2027 demand recovery estimate. The IEA judges that as supply gradually recovers, global oil supply in 2027 is expected to exceed total demand by 3.94 million barrels per day. The oil market faces a clear divergence between near-term and longer-term strength. Currently, the oil market is supported by refined product supply shortages and geopolitical disruptions, but in the medium to long term, it faces oversupply concerns as supply gradually recovers. The final inflation reading before the Fed's October meeting showed that U.S. headline CPI rose at its fastest pace in five months in September, driven by a rebound in fuel prices linked to the Iran war, while core CPI also exceeded expectations, continuing to squeeze household budgets ahead of the November midterm elections. Before the November 3 midterm elections, the economy and especially prices will remain the focus. The market fully expects the Fed to raise rates two more times by the end of January next year. Following the data release, the dollar surged while gold, silver, and copper fell sharply. U.S. President Trump has been trying to control the impact of rising energy prices. Polls show that voters dissatisfied with the status quo may channel their discontent toward Republicans in next month's midterm elections that will determine control of Congress. Time is running short for Trump. On the geopolitical front, there has been no notable de-escalation. Yemen's Houthi rebels said they attacked Saudi Aramco facilities in Dhahran, King Khalid Airport in Riyadh, and Saudi Aramco's refinery in Riyadh. Operations targeting airports and oil facilities will continue in the coming days. Over the past two weeks, Iran has continued to intensify attacks on vessels around the Strait, forcing some tankers to change routes, which has dealt a significant blow to the ship-to-ship transfer model. Reports suggest Iran's move is intended to escalate tensions to sustain high oil prices and thereby influence the U.S. midterm elections. Iran's parliamentary speaker, discussing strategy toward the U.S., said it must fight and negotiate simultaneously to force the U.S. to accept its demands. The recent consecutive geopolitical escalations have dominated oil price volatility and cooled earlier optimistic expectations for supply recovery. However, judging from the recent weakness in Middle East physical markets and the performance of Brent and SC crude, the market still expects a return to oversupply in the medium to long term for crude oil. With a relatively high geopolitical premium already priced in, funds have limited willingness to continue chasing the rally. Going forward, attention must remain on the progress of Middle East geopolitical developments ahead of the U.S. midterm elections. Caution is warranted in continuing to chase gains, and risk control should be carefully managed.
Daily Updates
[1] WTI front-month crude futures rose $0.95, or 1.01%, to $95.09 per barrel; Brent front-month crude futures rose $0.37, or 0.35%, to $106.06 per barrel; INE crude futures fell 2.95% to 733.9 yuan. [2] The dollar index rose 0.33% to 102.53; the HKEX USD/CNY pair fell 0.02% to 6.6629; the U.S. 10-year Treasury rose 0.15% to 104.91; the Dow Jones Industrial Average fell 0.09% to 51,621.48.
Recent Highlights
[1] IEA warns global diesel supply tightness will persist into next year, with slow Middle East export recovery weighing on the market. The International Energy Agency (IEA) stated that although crude shipping has somewhat recovered recently, refined product exports from the Middle East remain slow to recover, and global diesel supply is expected to remain tight for an extended period next year. The IEA noted that global diesel supply fell by 1.7 million barrels per day in the third quarter of this year, mainly because the Iran war disrupted transit through the Strait of Hormuz, on which large volumes of oil and refined product shipments depend, while Russia 鈥?a major global refined product exporter 鈥?was forced to cut production due to Ukrainian attacks on its refineries. IEA data shows that in the first nine months of 2026, global diesel exports averaged 4.7 million barrels per day, down 10% year-on-year. In September alone, combined net diesel exports from the Middle East and Russia fell by more than 60%. The IEA said the recent recovery in crude shipping has not been matched by a recovery in diesel supply, because refinery operations, refined product export capacity, and regional logistics remain affected by geopolitical conflicts. IEA monthly report: Oil exports from Gulf producers (excluding Oman) are 33% below pre-war levels. OPEC production is forecast to fall by 6.5 million barrels per day in 2026; non-OPEC production is forecast to increase by 2.7 million barrels per day in 2026. OPEC production is forecast to increase by 5 million barrels per day in 2027. Global oil supply is expected to rebound by 7.7 million barrels per day in 2027, compared with a previous forecast of 8 million barrels per day. IEA monthly report: Global oil supply increased by 2.5 million barrels per day in September to 102.3 million barrels per day. OPEC+ production rose by 2.1 million barrels per day in September, mainly driven by Saudi Arabia. IEA monthly report: Global oil demand will fall by 2.6 million barrels per day in 2026, compared with a previous forecast of 2.5 million barrels per day; global oil demand is expected to increase by 2 million barrels per day in 2027, compared with a previous forecast of 2.6 million barrels per day. Global oil supply in 2027 is expected to exceed total demand by 3.94 million barrels per day (previously forecast at 3.73 million barrels per day above). Total global oil supply in 2026 is expected to be 1.73 million barrels per day below demand (previously forecast at 1.74 million barrels per day below).
[2] Iraq's crude oil exports have rebounded sharply to about 2.7 million barrels per day, with plans to boost both southern and northern channels and pipeline exports. (1) According to the Iraqi News Agency, Iraqi Oil Ministry spokesman Rikabi said that despite shipping difficulties caused by the Strait of Hormuz crisis, Iraq's crude oil exports have rebounded substantially, currently reaching about 2.7 million barrels per day, compared with only about 200,000 barrels per day in May last year. (2) Rikabi said most exports are shipped through the southern channel, with the northern channel accounting for about 300,000 barrels per day; given the current situation, this export level is already relatively high. The Iraqi Oil Ministry plans to further increase export volumes through both southern and northern channels. (3) Rikabi said the Iraq-Turkey pipeline has a target export capacity of about 700,000 barrels per day, and the ministry is working to reach that level. The pipeline has a designed capacity of 1.5 million barrels per day, with a bilateral agreement stipulating a minimum capacity of 750,000 barrels per day. (4) Currently, exports through this pipeline are about 300,000 barrels per day, but the government plans to raise this to 750,000 barrels per day to increase exports and open more markets for Iraqi crude.
[3] Energy crisis unresolved, Strait of Hormuz shipping costs remain elevated. (1) Although the Strait of Hormuz is no longer paralyzed, fuel prices remain high, and a broader energy crisis stemming from tight oil supply is affecting drivers, truckers, and farmers worldwide. (2) The U.S. national average gasoline price is about $4.3 per gallon, the highest level for this time of year on record, while diesel prices are only about $0.2 below last month's all-time high. (3) Although Strait navigation has resumed, risks remain extremely high, and combined with attacks on Russian refineries and disruptions to Red Sea shipping, the energy system remains constrained. (4) The cost of shipping Middle East crude has surged dramatically, with VLCC daily charter rates from the Persian Gulf to China rising from about $65,000 last year to about $1.6 million. (5) Crew risk premiums, insurance costs, and tanker round-trip expenses have all soared in tandem, with crew compensation on some voyages reaching $25,000, while insurance and shipping costs push up overall expenditures. (6) The cost of lifting crude from the Persian Gulf has risen from about $2 per barrel to about $33 per barrel, with actual spot prices far exceeding futures prices and ultimately passing through to the gas pump. (7) The U.S. relies on gasoline imports and therefore bears global prices, with high energy costs creating sustained pressure on consumers and businesses. (8) Market sentiment is affected by both geopolitical risks and transportation bottlenecks, with short-term focus on Strait security, the impact of the Russia-Ukraine conflict on refining capacity, and the pace of Red Sea shipping recovery.
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