SunSirs: Supply Concerns Escalate, Causing Crude Oil to Surge 11% on Last Thursday, Rebounding above $110
On April 2nd (Thursday), the international crude oil futures market experienced a surge, with both NYMEX crude oil and Brent crude oil closing significantly higher, setting a significant stage increase. The core driving force behind this market trend is the renewed escalation of geopolitical conflicts in the Middle East. Market concerns about long-term disruptions in oil supply are concentrated, coupled with differences in contract delivery, bullish expectations from investment banks, and OPEC policy movements, among other factors, collectively driving up oil prices significantly and laying the groundwork for uncertainty in future market trends.
On Thursday, the international crude oil futures market saw active trading and intensified volatility, ultimately closing with a significant increase. Among them, the most actively traded May crude oil futures contract on NYMEX performed particularly well, closing up $11.42 in a single day, an increase of 11.41%, and settling at $111.54 per barrel, setting a record for the largest single day absolute increase since 2020. During the same period, ICE's most active June Brent crude oil contract also showed a strong upward trend, rising $7.87, or 7.78%, with a settlement price of $109.03 per barrel. Although both core crude oil indicators have achieved significant increases, they have not yet broken through the high of around $120 per barrel reached in the early stages of the conflict, indicating that although there are strong supply concerns in the market, there is still a certain wait-and-see attitude towards the future direction of the conflict.
In addition to crude oil contracts, refined oil futures also strengthened simultaneously. The RBOB gasoline futures contract rose 19.66 cents in May, settling at $3.2880 per gallon; The May heating oil futures contract rose 30.43 cents, with a settlement price of $4.3611 per gallon. The linked increase in refined oil prices further confirms the market's expectation of tight energy supply.
Core driver: The reignition of the Middle East conflict has triggered deep concerns on the supply side
The core cause of the surge in crude oil futures this time is the further escalation of geopolitical conflicts in the Middle East, especially the intensification of confrontation between the United States, Iran, and Israel, which directly impacts the core channels and production capacity security of global oil supply, triggering panic expectations in the market for long-term supply disruptions.
On the evening of April 1st local time, US President Trump delivered a speech at the White House, declaring a "quick, decisive, and overwhelming victory" in the war against Iran, and stating that "extremely fierce strikes" will be carried out against Iran in the next two to three weeks. He also revealed that relevant negotiations are underway, but did not specify a timetable for the end of hostilities, nor did he mention specific measures to promote the reopening of the Strait of Hormuz.
This statement further exacerbates market concerns about the deterioration of the regional situation, and the Strait of Hormuz, as a "chokepoint" for global oil transportation, undertakes 20% to 25% of the world's maritime crude oil trade, with a daily navigation volume of 20 million barrels. Currently, it is still closed, and alternative shipping channels and pipelines only cover slightly over one-third of the strait's transportation volume.
At the same time, Iran's retaliatory actions have further amplified supply risks. According to CCTV News, Iran has launched the 91st round of military operations under the "True Promise 4" campaign, launching a new round of attacks on the central areas of Tel Aviv and Haifa in Israel, causing serious damage to multiple targets. On April 2nd, Iran made it clear that it has taken restrictive measures on the passage of ships, which also means that the navigation restrictions in the Strait of Hormuz may become a long-term measure, further restricting global crude oil transportation.
In addition, the market and institutions generally hold a concerned attitude towards the supply side. The market is most concerned about whether Iran's oil infrastructure will face risks, and even if the infrastructure is not destroyed, the continued disruption of the regional situation will significantly delay the recovery of oil flows. In fact, the obstruction of navigation in the Strait of Hormuz has led to production cuts in Gulf countries. As of mid March, about 10 million barrels per day of production have been interrupted, and the reduction may further expand, creating a dilemma of "production capacity but no transportation". This substantial disturbance on the supply side has become the core driving force behind the sharp rise in oil prices.
Abnormal phenomenon: US crude oil prices surpass Brent crude oil premium, reaching a one-year high
A significant anomaly in this market is that the price of US crude oil has surpassed Brent crude oil for the first time, forming a rare upward trend. Normally, due to factors such as quality and transportation costs, US crude oil prices are generally lower than Brent crude oil. However, this time the NYMEX May crude oil futures contract is nearly $3 higher than the ICE June Brent crude oil contract, with the premium reaching the highest level in a year.
On the one hand, WTI crude oil trades on May delivery contracts, while Brent crude oil trades on June delivery contracts, with a nearly 30 day time difference between the two. The WTI near month contract naturally includes more immediate geopolitical conflict premiums, while the Brent far month contract is priced with the "possible ceasefire" time window included, resulting in a relatively lower premium. On the other hand, short-term supply concerns have pushed up WTI prices in the near month: the escalation of geopolitical conflicts in the Middle East and restricted navigation in the Strait of Hormuz have caused extreme panic in the market about short-term crude oil supply. Investors are concerned that the strait will not resume navigation in the short term, and there will be a larger gap in crude oil supply in the near month. They have flooded into WTI's May near month contract, further pushing up its price and widening the price difference with Brent crude oil.
Outlook for the future: There are still bullish expectations in the short term, and uncertainty still dominates in the future
Major investment banks have raised their oil price expectations and are optimistic about the short-term trend of oil prices. Citigroup stated that the average price of Brent crude oil in the second half of this year may be $95 per barrel in the baseline scenario and $130 per barrel in the optimistic scenario; JPMorgan Chase is more aggressive, believing that oil prices may climb to between $120 and $130 per barrel in the short term, and if the Strait of Hormuz continues to close until mid May, oil prices may even rise above $150. This expectation echoes Goldman Sachs' judgment. Goldman Sachs has recently released consecutive reports stating that based on the assumption of transportation disruptions in the Strait of Hormuz, the market will continue to increase risk premiums, and the era of high oil prices may persist in the long term.
According to the crude oil analyst of SunSirs, the current situation in the Middle East is still highly uncertain. The navigation status of the Strait of Hormuz and the follow-up direction of the US Iran and Israeli Palestinian conflicts will continue to dominate the short-term trend of oil prices. It is worth noting that the short-term fee risk of the Strait Joint Management Agreement drafted by Iran and Oman is still positive for oil prices. In the near future, oil prices will remain high. If the agreement is implemented in the medium and long term, the geopolitical risk premium may gradually disappear, and the market will return to the supply and demand fundamentals. If the implementation effect of the agreement is not good, there is a risk of expanding the supply gap. There is still a possibility of an upward trend in oil prices. In addition, it is also necessary to pay attention to OPEC's decision to increase production, the pace of releasing reserves, and the global economic recovery situation, which will affect the medium and long-term trend of oil prices.