Crude oil prices surged for a second consecutive session on Wednesday, following a volatile trading day that saw prices dip sharply before recovering. The market experienced swings exceeding $7 per barrel as it weighed competing bullish and bearish factors. Overall, the price action suggested that bearish news was being absorbed, with the market trend turning positive again.
The market's focus has shifted to the clash between the West's record-breaking release of strategic petroleum reserves and the supply tightness caused by export disruptions in the Middle East. At 22:00, the International Energy Agency (IEA) announced that its 32 member countries had unanimously agreed to release 400 million barrels of crude oil into the market. This release will be conducted within timeframes appropriate to each country's circumstances. The news initially caused a $4 per barrel drop in oil prices, but losses were quickly erased. With this decision finalized, investors are now more focused on resolving the supply disruptions. IEA Executive Director Fatih Birol stated that the agency would continue to monitor global oil and gas markets closely, emphasizing that the most critical issue is the restoration of navigation through the Strait of Hormuz.
The war involving the U.S., Israel, and Iran entered its twelfth day, with indications that hostilities are intensifying. U.S. President Donald Trump reiterated that the war with Iran would end soon, stating, "It will end when I want it to end." While his desire to limit losses is clear, achieving a swift conclusion to the conflict faces significant challenges, both from ally Israel and an increasingly aggressive Iran. Iran's Revolutionary Guard continues to target vessels attempting to pass through the Strait of Hormuz. A spokesperson for Iran's Khatam al-Anbiya Central Headquarters stated on March 11th that Iran's previous policy of "proportional retaliation" has ended. Moving forward, Iran will adopt a strategy of "serial strikes," abandoning a tit-for-tat approach. Any vessel belonging to the U.S., Israel, or their allies, or carrying their oil cargo, is now considered a "legitimate target" for Iranian armed forces. The spokesperson asserted Iran's full capability to blockade the Strait of Hormuz, declaring, "We will not allow even one liter of oil to pass through the Strait of Hormuz if it benefits America and its allies." He also stated that Western attempts to lower global oil and energy prices through external intervention are doomed to fail, warning the world to prepare for oil prices reaching $200 per barrel.
The market impact of the strategic reserve release has largely subsided now that the decision is confirmed. Similar to the market reaction following the release of 180 million barrels during the Russia-Ukraine war, the stockpile sale may temporarily ease supply pressures and moderate price increases, but it does not alter the underlying bullish trend for oil. The key factors remain whether the conflict ends as quickly as Trump suggests and whether navigation through the Strait of Hormuz resumes. Each day these issues persist adds further upward momentum to oil prices. With most bearish factors already priced in, and barring a confirmed truce between the U.S. and Iran, oil prices are unlikely to decline significantly further under the current circumstances. If the situation continues, the risk of prices moving higher remains substantial. Market participants should carefully manage their timing and exercise caution.
Note: While the strategic reserve release can temporarily alleviate market tightness, a longer-term market dynamic exists. Strategic reserves are essentially emergency buffers, not permanent supply sources. Once the conflict ends, the depleted inventories will eventually need to be replenished. If global economic growth remains stable and crude supply increases are limited, the demand generated from refilling these reserves could potentially push oil prices higher.
Daily Market Movements: WTI crude futures gained $3.80, or 4.55%, settling at $87.25 per barrel. Brent crude futures rose by $4.18, or 4.76%, settling at $91.98 per barrel. INE crude futures increased by 7.05%, closing at 695 yuan.
The U.S. dollar index rose 0.32% to 99.26. The Hong Kong Exchange USD/CNY rate fell 0.03% to 6.8688. The U.S. 10-year Treasury yield decreased 0.42%, with the price at 111.81. The Dow Jones Industrial Average fell 0.61% to 47,417.27.
Recent Developments: OPEC's monthly report indicated that the organization's oil production increased by 164,000 barrels per day (bpd) in February to 28.63 million bpd. Despite major supply disruptions in the Gulf region and extreme oil price volatility since the U.S.-Iran war began on February 28th, OPEC maintained its global supply, demand, and economic forecasts unchanged. The latest report did not explicitly mention the war but stated that geopolitical developments "warrant close monitoring" and that assessing their impact on economic growth, "if any," is premature. While OPEC does not forecast production for its members, OPEC+ major producers like Saudi Arabia, Iraq, Kuwait, and the UAE have begun shutting in some crude production due to limited storage capacity and insufficient alternative export routes. OPEC forecasts global oil demand to increase by 1.38 million bpd in 2026, reaching 106.53 million bpd, and by 1.34 million bpd in 2027, reaching 107.87 million bpd. Non-OPEC supply is expected to increase by 630,000 bpd in 2026 to 54.83 million bpd, and by 610,000 bpd in 2027 to 55.44 million bpd.
Secondary sources showed Saudi Arabia's crude output increased by 24,000 bpd in February to 10.11 million bpd. Iraq's production rose by 31,000 bpd to 4.188 million bpd. UAE production increased by 30,000 bpd to 3.419 million bpd. Venezuela's output increased by 80,000 bpd to 903,000 bpd. Iran's production rose by 34,000 bpd to 3.176 million bpd.
Russia's crude production in February decreased slightly by about 56,000 bpd from January to 9.184 million bpd, a drop of approximately 0.6%. Despite Western sanctions and pressure on exports to India, Russia has largely maintained stable production. Since February, Russian oil sales to India have begun recovering after Washington granted Indian refiners a 30-day sanctions waiver to purchase Russian crude loading from March 5th. Russia is the world's third-largest oil producer. OPEC's report also noted that Kazakhstan's crude production increased by 293,000 bpd in February to 1.489 million bpd, reversing January's decline, as output gradually recovered at its giant Tengiz field.
Exports through the Caspian Pipeline Consortium (CPC) have tightened sharply. Three industry sources revealed that the CPC has cut its March export schedule for CPC Blend crude from an initial 1.7 million bpd to approximately 1.4-1.5 million bpd. This represents a significant 15% reduction from the initial plan. The supply tightening is directly due to the cancellation of eight cargo shipments. The CPC is a key export route for Kazakh crude, and changes in its capacity directly impact global light crude supply. In February, CPC loadings were around 1.1 million bpd, influenced by recovering field production. Currently, bad weather and frequent drone alerts continue to disrupt export operations, exacerbating logistics bottlenecks and further tightening the global crude supply situation already strained by the Iran conflict.
The U.S. Navy informed the shipping industry on Tuesday that it cannot currently provide escort services through the Strait of Hormuz. Since the war with Iran began, the U.S. shipping industry has made near-daily requests for military escorts, which have been refused by the Navy due to the high risk of attack when transiting the Strait. The Navy's assessment indicates that Middle East oil exports will continue to be disrupted, contradicting President Trump's statements that the U.S. is ready to provide naval escorts to restore routine traffic through the critical waterway. The Navy has held regular meetings with shipping and oil industry representatives, stating that escort services are not currently feasible and would only be considered once the attack risk diminishes.