**Market Outlook**

Monday's oil price rebound likely disappointed many investors who expected an opening decline, particularly those short on domestic SC crude, who must have felt uneasy. While European and American oil prices rebounded approximately $1.5 from their lows during Asian and European trading sessions, SC crude surged over 20 yuan from its low point, representing a $3 increase that doubled the gains of international benchmarks, creating considerable market confusion. The oil price rebound was partly due to the modest production increase decision providing closure, leading some funds to exit positions. Additionally, concerns about supply disruptions from sanctions prompted some investors to adopt a wait-and-see approach. However, overnight trading quickly erased intraday gains, ultimately closing with minimal increases and forming a long upper shadow, demonstrating oil's own version of "letting the bullets fly."

Sunday's OPEC+ modest production increase aligned with market expectations. OPEC used the gentlest possible language to ease market concerns about the production increase, promising to support market stability and reaffirming the importance of maintaining a cautious approach with full flexibility to potentially pause or reverse additional voluntary production adjustments, which somewhat reassured the market. Additionally, statements about preparing second-phase sanctions against Russia led some investors to remain cautious. Following Moscow's largest air assault on Kyiv since the conflict began, the likelihood of further U.S. sanctions on Russia is increasing. Escalating tensions between the U.S. and Venezuela also heightened market anxiety, to some extent raising concerns in the Chinese market about Venezuelan supply, which partially influenced Monday's significant SC crude rebound. Geopolitical supply disruptions continue to trouble the oil market, with multiple factors driving oil price surges during Asian trading.

Regarding Monday's oil price surge, some institutions interpreted this as international oil prices rebounding in response to OPEC+'s decision to slow production increases in October. This presents an interesting perspective - oil price gains seem to validate this logic, though it may be misguided, as if modest production increases don't constitute actual increases that would pressure oil prices. From a global perspective, crude oil markets haven't shown obvious inventory builds since July, especially considering inventory growth in Chinese markets, suggesting other regions, including the United States, haven't experienced significant crude accumulation. This creates differing interpretations of oil market supply-demand dynamics among investors with various perspectives. The next six months represent the period when EIA predicts enormous crude supply surplus pressure, meaning markets enter a critical phase of confirming excess expectations, making directional choices for oil prices crucial.

Overall, oil prices face relatively complex influencing factors, including differing perspectives on supply-demand evolution. However, comprehensive assessment suggests that under this year's theme of OPEC+ accelerated production increases and demand performance again falling short of early-year expectations, the super surplus pressure facing crude markets remains oil prices' core driver. Operationally, we recommend maintaining a strategy of shorting on rallies while carefully managing timing and participating cautiously.

**Daily Market Updates**

[1] WTI crude futures closed up $0.39 or 0.63% at $62.26/barrel; Brent crude futures closed up $0.52 or 0.79% at $66.02/barrel; INE crude futures closed up 0.84% at 480.2 yuan.

[2] U.S. Dollar Index fell 0.29% to 97.45; Hong Kong Exchange USD/CNY fell 0.11% to 7.1229; U.S. 10-year Treasury gained 0.15% to 113.58; Dow Jones Industrial Average rose 0.25% to 45,514.95.

**Recent News**

[1] **OPEC+ Increases Production, Saudi Arabia Cuts Asian Crude Prices**

Following OPEC+'s announcement to continue increasing oil production, Saudi Arabia will lower prices for all grades of crude destined for Asia next month. A price list shows Saudi Aramco will reduce its flagship Arab Light crude October shipment prices to its largest market by $1/barrel. Next month, this grade will sell at a premium of $2.20/barrel over regional benchmark crude, below refiners' and traders' expectations. According to a survey of refiners and traders, the company was expected to cut prices by 50 cents/barrel. Saudi Arabia and its OPEC allies agreed over the weekend to continue pushing for further production increases. Previously, Saudi Arabia had accelerated production increases over several months. The alliance seeks to reclaim market share taken by competitors, potentially departing from its traditional goal of defending crude prices.

[2] On September 7, President Trump stated that several European leaders would visit the United States on the 8th or 9th to discuss the Russia-Ukraine conflict. Trump indicated he would soon speak with Russian President Putin. He expressed dissatisfaction with the current state of the Russia-Ukraine conflict but emphasized confidence in "quickly resolving" it. Trump didn't reveal which specific European leaders would visit, and the White House hasn't responded.

When asked Sunday at the White House whether he was prepared to implement "second-phase" sanctions on Russia, Trump replied: "Yes, ready." But he provided no further details. Trump had previously predicted he could quickly end the Ukraine conflict after taking office in January but failed to achieve this, causing frustration. The White House didn't immediately respond to email requests for comment Sunday, nor specify what measures Trump was considering. This exchange followed up on Trump's Wednesday remarks when he defended actions already taken against Russia, including punitive tariffs imposed last month on Indian goods imported to the U.S. India is one of Russia's major energy export buyers, while Western buyers have reduced purchases due to the conflict. "This cost Russia hundreds of billions of dollars," Trump said Wednesday. "Can this be called inaction? And I haven't started the second or third phase yet." Treasury Secretary Bessent said Sunday that the U.S. and EU might impose "secondary tariffs" on countries purchasing Russian oil, pushing Russia's economy to the brink of collapse and forcing President Putin back to the negotiating table.

[3] **Gulf Oil Price Volatility: OPEC+ Production Increase Slowdown, Market Undercurrents**

(1) OPEC+ members decided to increase October production by only 137,000 barrels/day, far below previous months' increases of approximately 555,000 barrels/day. This move was viewed as "moderate," directly stimulating market risk-aversion sentiment and strengthening spot premiums for Middle Eastern benchmark crudes including Oman, Dubai, and Murban.

(2) Despite OPEC+'s lower-than-expected production increases, market concerns about potential further sanctions on Russian crude persist, providing oil price support. Cash Dubai crude premiums to swaps rose 6 cents to $3.10/barrel, indicating structural market improvement.

(3) Traders should closely monitor fundamental changes in global crude supply-demand and potential impacts of geopolitical risks on market sentiment.

**Crude Market Price "Undercurrents": Middle Eastern Heavy Crude in Demand, Spreads May Remain Negative**

(4) Analysts indicate that despite OPEC+ plans to increase crude production in October, the Brent-Dubai spread is expected to remain negative. TotalEnergies Senior Vice President of Trading and Shipping Rahim Azouni pointed out that strong demand for heavy crude is the fundamental reason for the narrowing Brent-Dubai spread. The tightening Brent-Dubai spread allows more attractively priced U.S. West Texas Intermediate crude to accelerate flows into Asian markets.

(5) Looking ahead, global crude supply in 2026 is expected to be primarily driven by Latin America, with TotalEnergies' Suriname production project reaching peak production of 200,000 barrels/day within two years.

(6) This situation highlights the crucial role of geopolitical factors and supply expectations in crude market pricing, requiring market participants to closely monitor the interplay of multiple factors.