During the National Day holiday, international oil prices first rose and then fell back. The absolute price changes were not large, but intraday volatility was significant, with Brent crude at one point swinging by as much as $7 within a single day.

U.S. WTI crude and the Middle East market were more focused on supply pressure pushing prices lower. As of 3 a.m. on October 8, WTI crude had fallen by about $1.5 compared with the domestic close before the holiday, while Brent crude had risen by about $3.7 compared with the domestic close before the holiday. Europe, more anxious about geopolitics due to supply tightness, pushed Brent crude to outperform other regions. The widening East-West arbitrage spread is the main change reflecting the current divergence in the crude oil market.

During the holiday, geopolitical conflicts across multiple fronts showed signs of escalation. Russia and Ukraine increased their strikes against each other, and fighting between Saudi Arabia and the Houthi armed group continued. After coordinated negotiations at the end of September made no obvious progress, the market worried that U.S.-Iran tensions could heat up again, while Iran intensified attacks on vessels in the Strait of Hormuz. These geopolitical factors continuously brought concerns to the market and stimulated oil prices to spike during the National Day holiday.

However, on the supply-demand side of the crude oil market, pressure on the supply end continued to emerge. Crude prices at Middle Eastern origins weakened noticeably. Saudi Arabia said its East-West pipeline has restored throughput to 5.8 million barrels per day, equivalent to more than 80% of its total capacity. Saudi Arabia unexpectedly cut its November official selling price for Asian crude while raising prices for Northwest Europe and the Mediterranean. As the largest crude exporter in the Middle East, Saudi Arabia set the November official selling price (OSP) for Arab Light sold to Asia at a discount of $5 per barrel to the Oman/Dubai average, down $3 from the previous month — the largest discount since June 2020. Saudi Arabia's aim is to compete for major downstream buyers, and other Gulf states have also offered large discounts, reflecting that crude supply has become increasingly ample.

According to third-party agency Kpler, in September, oil exports from Gulf countries in the Middle East excluding Iran basically recovered to pre-war levels, with at least 16.5 million barrels per day of crude leaving the region. However, during the National Day holiday, as multiple vessels were attacked in the Strait of Hormuz, flows through the strait may have declined somewhat. Still, Gulf countries have all stated that despite continuous attacks, they will continue to use ship-to-ship transfers to complete exports. Geopolitical disruptions remain a point of concern for the market regarding supply stability, but anxiety over crude oil supply has largely faded.

At present, the market is increasingly reaching a consensus that crude oil is abundant but refined products are in short supply, and this anxiety continues to trouble the market. The CEO of Kuwait Petroleum Corporation (KPC) said there is currently a refined product supply gap of about 6 million barrels per day in the market. This has also been an important factor keeping the oil market from cooling over the past period. To stabilize surging fuel prices before the November midterm elections, Trump considered banning diesel exports to pressure the EU. Ultimately, G7 countries agreed last Friday to release 100 million barrels of diesel and crude from emergency reserves and pledged to avoid imposing energy export restrictions.

Bullish factors in the crude oil market: 1. Geopolitical risks, with multiple fronts still at risk of escalation; 2. Continuously depleted inventories have reduced the oil market's ability to buffer potential supply disruptions; 3. The global refined product market, especially in Europe and the U.S., is tight, with cracking spreads remaining high, providing some support to crude; 4. For consuming countries, high freight costs remain a key pressure. Bearish factors: 1. Middle East Gulf export volumes have rebounded sharply to near pre-war levels, and countries maintain a strong willingness to export; 2. High costs are suppressing demand; 3. China has reduced its refined product export quota to ease domestic pressure.

Summarizing the above core bullish and bearish factors, they can either continue to reinforce the original direction or reverse it, producing complex effects on oil prices. This also caused oil prices to struggle throughout the National Day holiday, with repeated intraday tug-of-war across multiple trading days fully reflecting the current complex situation in the crude oil market. The only certainty is that high volatility in oil prices will remain the norm. Participate cautiously and pay attention to risk control.

Recent News

[1] [Saudi Aramco CEO: Global oil supply buffer is alarmingly thin] (1) Saudi Aramco CEO Amin Nasser said the global oil supply buffer is "alarmingly thin." (2) He said commercial crude inventories now stand at less than 6 billion barrels, most of which is effectively unavailable. (3) He said emergency reserves may help us get through the winter but cannot solve long-term supply problems. Until the Strait of Hormuz fully restores navigation and market confidence returns, pressure on crude and refined product prices will intensify. (4) He said these inventories have mitigated the loss of more than 1 billion barrels of oil supply, most of it from onshore commercial inventories, which are "the only major tool left in the toolbox." (5) He said total crude supply has fallen by nearly 3 billion barrels, roughly equivalent to half the crude and refined products that would normally transit the Strait of Hormuz. (6) He said global oil inventories were nearly 10 billion barrels when the world entered the crisis. (7) He said replenishing inventories while meeting demand could take up to two years. (8) Nasser said ocean shipping has been severely hit and supply chains are currently strained. Saudi Aramco CEO: commercial crude inventories now stand at less than 6 billion barrels, with less than 10% actually usable, while the rest is pipeline fill, minimum tank levels and oil needed to maintain operations. Saudi Aramco CEO: without the East-West pipeline, Brent crude could already have reached $200 per barrel. Saudi Aramco CEO: we see enormous global demand to rebuild inventories. Over the next 18 months, the world will need at least an additional 2 million barrels per day of demand to replenish current inventories.

[2] [Vitol CEO warns: if Middle East supply is disrupted, oil could face a $200 scenario] (1) Vitol CEO Russell Hardy said that over the past 7 to 10 days, about 14 million barrels per day of oil has been flowing out of the Middle East, of which about 12 million barrels is crude and 2 million barrels is refined products. (2) He said that if these supplies were lost, a $200 per barrel scenario would indeed emerge. (3) Hardy noted that Western inventories are limited and the region needs to supply 10 million to 14 million barrels per day to stabilize prices and prevent further inventory drawdowns. (4) At the same forum, Saudi Aramco CEO Amin Nasser said that without Saudi Arabia's East-West pipeline, Brent crude might already have hit $200, and that global inventories are alarmingly thin. (5) The two people in the oil industry with the best information both gave the same $200 figure. (6) Since March, global inventories have fallen by more than 400 million barrels. (7) With little buffer left, once this 14 million barrels per day flow is interrupted, prices will react within days because there is no excess supply in inventories to fill the gap. (8) Brent crude's current pricing at about $100 assumes these barrels continue to flow; pricing at $200 assumes they stop flowing. (9) Both have reasons to say this: Saudi Aramco benefits from showing that its pipeline supports the market, while Vitol earns more when the market is volatile and supply is tight. Neither has much reason to play down the risk. (10) Their figures still align with the physical market: Western inventories are low, refineries are running at full capacity, and the main route bypassing the Strait of Hormuz runs along the Red Sea coast, exactly where the Houthis are currently attacking. (11) What remains uncertain is the 14 million barrels per day figure itself. It is a 7-to-10-day average built on shipments through the disputed strait and a single Saudi pipeline. (12) If this flow is maintained for several weeks, inventories can begin to rebuild; if not, the $200 scenario is no longer just a hypothesis.

[3] Kuwait Petroleum Corporation (KPC) CEO: our tankers are directly owned by the company, not leased. We are considering increasing domestic storage capacity and evaluating arrangements for our three overseas refineries. Kuwait Petroleum Corporation (KPC) CEO: the market has ample crude oil but a shortage of refined products. There is currently a refined product supply gap of about 6 million barrels per day in the market. We need to focus on moving refined products out of the Middle East Gulf to ease the bottleneck at refineries in the region. For customers using their own tankers to enter the Middle East Gulf, we do not offer discounts or insurance. Kuwait Petroleum Corporation (KPC) CEO: our current oil production is about 2 million barrels per day, below the 2.6 million barrels per day before the war began. We have been able to do this by using our strategic tanker fleet. Neither pipelines nor inventories can replace free navigation through the Strait of Hormuz. Despite continuous attacks, we still use ship-to-ship transfers. We are proceeding as planned and are expected to achieve our goal of raising crude production capacity to 4 million barrels per day by 2035. Kuwait Petroleum Corporation (KPC) CEO: we are in discussions with European partners and telling them they need logistics capabilities, including refined product storage facilities.