Monday saw a sharp decline in domestic crude oil futures, with the 2611 contract plunging at the open and at one point extending losses to over 6% during the session. International benchmarks followed suit, with Brent crude dipping to $96.97 per barrel and WTI touching an intraday low of $93.58 per barrel. The main SC crude contract, which first breached the 900 yuan per barrel mark on September 14th, has now retraced more than 20% over just one week.

The primary catalyst for this shift has been the transition of geopolitical de-escalation signals from mere expectations to verifiable facts. Firstly, Saudi Arabia's crude oil outflows have recovered more quickly than anticipated, effectively disproving supply disruption concerns. JPMorgan noted last Friday that Saudi oil shipments through the Strait of Hormuz over the past six days averaged 2.8 million barrels per day, a significant jump from the 700,000 barrels per day recorded in August. Concurrently, Saudi Arabia is offering more spot cargoes to Asian refiners via ship-to-ship transfers at Oman's Sohar port, having sold approximately 20 million barrels for delivery outside the strait last week, while aiming to restore half of the East-West pipeline's capacity within days. Market pricing for a supply gap due to alleged pipeline closures is being rapidly corrected by actual export data.

Secondly, diplomatic efforts have yielded tangible progress, with renewed expectations for US-Iran negotiations. Qatar's foreign ministry spokesperson, Al-Ansari, stated on the 20th that Qatar is maintaining communication with both the US and Iran to facilitate a resumption of talks, adding that several US officials have confirmed Washington's desire to reach a deal and end the conflict. Iran has communicated its negotiating conditions through Qatar and Pakistan to relevant intermediaries, while the US State Department has approved visas for Iranian President and Foreign Minister to attend the UN General Assembly high-level session in New York. Trump is expected to meet with Gulf leaders during the assembly to discuss next steps regarding the conflict with Iran.

Despite these developments, physical market tightness persists. Data through September 13th shows Shandong independent refinery crude arrivals fell 31.24% week-on-week, with port inventories continuing to draw down. Last Tuesday, the SC crude premium over Brent had spiked above $25 per barrel, hitting a yearly extreme. However, confronted with this strong physical reality of insufficient arrivals and spot scarcity, the market has chosen to first price in the weaker expectation of geopolitical détente. Near-term oil prices will likely remain highly dependent on the progress of US-Iran contacts during this week's UN General Assembly. Should diplomatic channels achieve substantive breakthroughs, crude's geopolitical risk premium could continue to unwind.