Where to look first

According to a report from the National Development and Reform Commission (NDRC), the price adjustment window for domestic refined oil products will open at midnight tonight (August 14). Monitoring by the NDRC's Price Monitoring Center shows that during this adjustment cycle (from midnight on July 31 to midnight on August 14), international oil prices first declined then rose.

Starting from midnight on August 14, the retail price caps for gasoline and diesel in China will be reduced by 230 yuan per ton and 220 yuan per ton, respectively. On a national average basis, 92-octane gasoline, 95-octane gasoline, and 0-diesel will see per-liter decreases of 0.18 yuan, 0.19 yuan, and 0.19 yuan, respectively.

A calculation reveals that with this confirmed reduction in retail price caps, a private car filling up a standard 50-liter tank of 92-octane gasoline will save 9 yuan.

Why international oil prices first fell, then rose during this cycle

First, heightened uncertainty in the U.S.-Iran situation drove oil prices down initially before they rebounded. In early August, the U.S. canceled its large-scale military strike plan against Iran, temporarily easing Middle East geopolitical tensions and significantly reducing the risk premium in the crude oil market. Brent crude oil futures prices (hereafter referenced) fell from $90 per barrel to around $79 per barrel within two trading days. Subsequently, the U.S.-Iran situation became deadlocked, reigniting market concerns and causing prices to fluctuate back up to near $87 per barrel.

Second, persistent disruptions to critical crude oil shipping lanes have intensified the global supply tightness. Shipping through the Strait of Hormuz has nearly ground to a halt, with Iran enforcing a blockade of the strait and planning to ban U.S. and Israeli vessels. The U.S. continues to tighten its naval blockade of Iran. On August 12, the number of transiting vessels through the strait hit its lowest level in nearly three months. Simultaneously, security risks in the Red Sea and the Bab el-Mandeb strait continue to spread. In August, Yemen's Houthi group attacked Saudi maritime shipping, ports, and refineries, escalating regional risks to crude oil production and transport. Additionally, the declining U.S. Strategic Petroleum Reserve and upward price forecasts from agencies like the U.S. Energy Information Administration (EIA) have also contributed to the volatility in international oil prices.

What to watch next

The NDRC's Price Monitoring Center assesses that the current geopolitical situation remains highly uncertain. Negotiations for resuming navigation through the Strait of Hormuz are caught in a repetitive tug-of-war. Both the U.S. and Iran have submitted war compensation claims, increasing the difficulty of reaching an agreement. Iran has explicitly stated it will escalate the conflict if its conditions are not met. Going forward, it will be crucial to continuously monitor the impact of U.S.-Iran developments on international oil prices.