Crude Oil: The market is experiencing wide fluctuations, and it is not advisable to chase rises or sell on dips.

The recent uncertainty in the oil market is centered on the direction of the evolving conflict between Iran and Israel. Currently, with the mediation of the United States, Israel has shown relative restraint. This suggests that Israel may take more limited retaliatory actions to avoid the outbreak of a full-scale conflict. If Israel only targets Iran's military facilities, it is unlikely to cause substantial disruption to Iran's oil exports, and Iran's suspended oil exports are expected to resume. The weakening of the drivers that previously supported aggressive bullish bets on geopolitical risks has led to a rapid plunge in oil prices. The focus of the crude oil market is once again on the expectation of oversupply next year.

With the conflicting parties in Libya reaching a reconciliation agreement, ending the crisis at the central bank, and reappointing the bank's management, the government appointed by the Libyan House of Representatives announced at the beginning of this month that it would reopen the oil fields and ports under its jurisdiction. The Libyan National Oil Corporation announced yesterday that current oil production has risen to 1.3 million barrels per day. Thanks to technological advancements such as improved drilling efficiency, the current high production period of U.S. shale oil is expected to last until 2026. OPEC has consecutively downgraded global oil demand forecasts, with the market continuing to worry about the outlook for oil product demand. OPEC adjusted the global growth rate based on the decline in China's demand growth, and on Monday, in its October "Monthly Oil Market Report," it downgraded its forecast for world oil demand for 2024 and 2025 for the third consecutive month. The report's forecast for global average daily oil demand was reduced by 100,000 barrels compared to September, with an estimated global average daily oil demand of 19.3 million barrels in 2024, and the forecast for global demand growth in 2025 was adjusted down from 1.74 million barrels per day to 1.64 million barrels per day.

Advertisement

On the same day, China announced its crude oil import volume for September, with the latest data showing that China's crude oil imports have declined for the fifth consecutive month. With the increasing total supply of global crude oil and the trend of slowing demand growth, the crude oil market may face the pressure of oversupply in the future. On the OPEC side, plans are underway to gradually increase production starting in December, with an increase of about 200,000 barrels per day each month, continuing until next November, to complete an increase of 2.2 million barrels per day. That is to say, as time goes on, OPEC's increase in production will lead to a continuous increase in global crude oil supply, and the supply and demand balance in the crude oil market will shift towards a surplus in 2025.

An extreme scenario is that if Iran's crude oil exports are significantly damaged, leading to a short-term surge in oil prices, OPEC's surplus production capacity of over 4 million barrels per day enables it to stabilize oil prices through increased production. Additionally, the OPEC alliance, which includes Russia and its allies, may postpone plans to increase production later this year. The current crude oil price is below the price level needed by many OPEC countries to achieve their national budgets. The IEA further downgraded its forecast for global oil demand growth this year, citing weak demand in China. The agency believes that China's oil demand will only increase by 150,000 barrels per day in 2024, with its consumption in August down by 500,000 barrels per day compared to the same period last year, marking a decline for the fourth consecutive month. The IEA stated in its monthly report: "China's oil demand continues to be below expectations and is the main factor dragging down overall demand growth." For many years, China has been driving the growth of global oil consumption. The IEA has indicated that China's shift towards electric vehicles has changed the pattern of this, the world's second-largest economy. Furthermore, the IEA raised its estimate for global oil demand growth in 2025 to 1 million barrels per day, up from the previous estimate of 950,000 barrels per day.

Strategy Recommendations:

Overall, the future of crude oil prices remains highly uncertain, mainly due to fluctuations in Middle Eastern geopolitics and potential significant changes in crude oil supply that could be triggered by changes in OPEC's production increase plans.

In terms of operations, the crude oil market is experiencing wide fluctuations, and it is advisable to avoid chasing rises or selling on dips. The main strategy should be to take short-term long positions when the market stabilizes after下探ing to support levels.