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Simulated trading client. Source: Energy R&D Center. Outlook: The oil market opened sharply lower in the overnight session, as if correcting the day's overreaction. In the early morning, as Trump said the U.S. and Iran are holding productive discussions and that there would be no attack on Iran before the midterm elections, the pullback in oil prices expanded further. Overall, however, geopolitical concerns still provided upward momentum for oil prices.

On the first trading day after the National Day holiday, China's domestic energy and chemicals sector staged a broad, sharp rally, with as many as 7 products hitting the daily limit and 5 closing at the limit. Such performance surprised many investors. Among them, crude oil-related products posted the largest gains, with high-sulfur fuel oil rising more than 18% to lead the entire market, while SC crude oil's maximum gain also exceeded 10%. The sudden across-the-board surge in China's energy and chemicals sector reflected market concerns about a sharp rise in the cost of imported crude oil.

Over the past period, tanker freight rates from the Middle East, West Africa, and the Americas to China all soared. The latest shipping cost has reached as high as US$40 per barrel, accounting for more than 35% of China's crude oil import cost, far above the US$2-5 per barrel shipping cost under normal market conditions a year ago. This means that although recent discounts on Middle East crude prices can offset the added cost from higher freight, the world's largest crude oil importer still feels enormous cost pressure. Such concerns were transmitted throughout the entire crude oil processing chain, and combined with the still-present risk of escalating geopolitical tensions, ultimately amplified market volatility and drove multiple energy and chemicals products to their daily limits.

On the supply and demand side of the crude oil market, production shutdowns in U.S. offshore oil output expanded as Hurricane Isaias approached the northern Gulf of Mexico coast. The latest information from the U.S. Bureau of Ocean Energy Management showed that about 62.89% of daily oil production and 57.35% of daily natural gas production in the Gulf of Mexico have been shut in, providing a short-term bullish driver for oil prices. In the Middle East, after multiple ships were attacked in the Strait of Hormuz as Iran sought to emphasize its control over the waterway, although Gulf states stressed they would still use ship-to-ship transfers to complete exports, the market still appeared worried. Previously, the CEO of Vitol and the CEO of Saudi Aramco, two of the people with the greatest information advantage in the oil industry, warned on the same occasion that if the current supply from the Middle East cannot be sustained, the scenario of oil prices reaching US$200 would no longer be merely hypothetical.

At present, anxiety over uncertainty dominates the upward push in oil prices. Iranian Foreign Minister Araghchi said on Thursday that U.S.-Iran talks are still continuing and that Iran will respond to the U.S. proposal in the coming days. Trump also claimed in the early morning that the negotiations were productive and said he would not attack Iran before the midterm elections. A preliminary assessment is that the main purpose of these remarks was to ease market concerns. The subsequent pace of oil price movement still needs to be observed through geopolitical developments and changes in actual export volumes from Middle East Gulf countries. The situation remains highly fluid, and the market is in an unstable phase. Time will give the final answer on the ultimate direction. Participate cautiously and pay attention to risk control.

Daily developments

[1] WTI front-month crude oil futures rose US$1.07, or 3.64%, to US$91.49 per barrel; Brent front-month crude oil futures rose US$4.08, or 4.07%, to US$104.28 per barrel; INE crude oil futures fell 0.62% to 732.8 yuan.

[2] The U.S. dollar index rose 0.64% to 102.12; the Hong Kong Exchange's USD/CNY rose 0.01% to 6.6735; U.S. 10-year Treasury notes rose 0.46% to 104.72; the Dow Jones Industrial Average rose 0.1% to 51231.64.

Recent key news

[1] [Ship attacks in the Strait of Hormuz rise to the highest level this year, crude transit volumes decline] ⑴ The Strait of Hormuz recorded the highest weekly number of ship attacks this year, causing crude transit volumes through this strategic waterway to fall about 27% from their peak during the Iran war. ⑵ The UK Maritime Trade Operations office reported that 10 tankers were attacked in Hormuz between September 28 and October 4, and consultancy Kpler noted this was the highest weekly number recorded this year. ⑶ During the same period, the volume of crude passing through the strait fell about 27% from its wartime peak, with 4 more attacks since October 4. ⑷ The UK Maritime Trade Operations office said projectiles of unknown origin and drones struck vessels on this key global energy trade route, causing fires and evacuations, with most incidents occurring on the Omani side of the strait. ⑸ Before the war, this route carried about 20% of the world's oil transportation, and Tehran used it as a major bargaining chip against Washington, while the United States opened a southern route near Oman. ⑹ A senior oil analyst at Kpler pointed out that about 40% of Middle East oil exports currently bypass Hormuz. ⑺ Despite the decline in transit volumes, total Middle East crude exports via alternative routes such as the Gulf of Oman and the Red Sea have recovered to close to pre-war levels, exceeding 17 million barrels per day in September, up from about 11.65 million barrels per day in August and close to the 2025 average of about 18 million barrels per day. ⑻ Saudi Arabia shifted some exports westward, increasing cargo volumes at Red Sea ports. ⑼ Kpler believes the risk has already been reflected in prices, the market has not been paralyzed, and it expects Hormuz transit to continue normalizing without the need for a political agreement. ⑽ Going forward, attention should be paid to attack frequency, alternative route capacity, and changes in how oil prices price in geopolitical risk.

[2] [Strengthening tropical storm forces Gulf of Mexico oil companies to cut output and evacuate] ⑴ As the Gulf of Mexico region braces for the arrival of a tropical storm, oil companies operating there have begun reducing production and evacuating personnel from offshore facilities. ⑵ The U.S. National Hurricane Center said the storm is strengthening and is expected to become a powerful hurricane by the time it makes landfall on Friday. ⑶ Chevron said on Wednesday that it had initiated shutdown procedures at 4 operating sites in the Gulf of Mexico and was evacuating all related personnel, while production at several other facilities remained normal. ⑷ Shell said it was shutting in production and evacuating personnel at 5 facilities and had relocated non-essential personnel from another facility. ⑸ UK company Harbour Energy said in an emailed statement that it had also begun reducing production and evacuating personnel at some facilities. ⑹ Due to frequent storms in the region, oil companies operating in the Gulf of Mexico are no longer unfamiliar with temporary production cuts and evacuations. ⑺ The U.S. Bureau of Ocean Energy Management said that as of noon Wednesday, about 510,000 barrels per day of production had been shut in, equivalent to about one quarter of current Gulf of Mexico output. ⑻ The short-term contraction on the supply side provides some support for oil prices. Going forward, attention should be paid to the storm's path and the pace of production recovery after landfall.

[3] Futures-cash gap widens sharply: futures prices significantly undervalue Asian physical crude costs. Historically, the spread between Brent futures and physical crude oil has remained stable for a long time. From 2007 to 2019, the standard deviation of the spread between spot and futures was only about US$1 per barrel, and futures could broadly track the physical crude oil market. This year, however, that standard deviation has soared to nearly US$8 per barrel, briefly exceeding US$20 per barrel in September, showing a severe divergence between futures and physical markets. According to Argus Media data, current Brent futures prices are equivalent to only 60%-70% of Asian crude landed costs, while in normal years that ratio is close to 90%; against diesel prices, Brent futures account for only 50%, compared with 80%-90% under normal conditions. Simply put, the oil price seen on trading screens is significantly lower than the actual cost for Asian refiners to purchase crude. The core reason for this phenomenon is not a crude supply cutoff, but spatial constraints. The value of a barrel of crude no longer depends only on extraction cost, but on where it is and whether it can be delivered to refineries at low cost. Crude flows through the Strait of Hormuz have recovered from a low of 2 million barrels per day in April to 11 million barrels per day, but overall Middle East crude outflows, including pipeline bypasses, are still 2.5 million barrels per day below pre-war levels. Tanker capacity is tight, and large volumes of crude are forced onto longer and more complex routes. Crude passing through Hormuz may not be delivered quickly to marginal refiners in urgent need of feedstock. Sina partnership platform futures account opening: safe, fast, and protected.