Global crude prices suffered a sharp selloff on Monday, with Brent briefly falling below the $100 per barrel threshold. This price action vividly reflects the market's current expectations for a potential de-escalation in geopolitical tensions this week.

In fact, there was no significant cooling in Middle East geopolitical tensions over the weekend. The Houthis and Saudi Arabia continued direct exchanges of attacks, and Ukraine also struck a Moscow refinery. However, oil prices gapped slightly higher on Monday before trending relentlessly downward, with the intraday loss at one point exceeding 4%.

The primary driver behind the weaker crude complex is the market's anticipation of geopolitical cooling. Elevated refined product prices are pressuring the Trump administration, and recent signals from both Iran and the United States suggest a mutual willingness to return to the negotiating table. During this week's UN General Assembly session, Trump is scheduled to meet with Gulf state leaders, and both the Iranian President and Foreign Minister will also attend. More critically, the market is eagerly anticipating a visit to the US by the Chinese leader. The prospect of the world's most influential nations coming together to stabilize the situation becomes the week's biggest focus for cooling the crude oil market.

On the supply-demand front, although the two straits remain in a blockade state and Saudi Arabia's East-West pipeline has been damaged, data from relevant tracking agencies indicates that total global crude exports are gradually rebounding. Saudi exports, in particular, are showing resilience, having minimized pipeline damage losses since last week by significantly increasing exports through the Strait of Hormuz. On the demand side, the dampening effect of high oil prices will gradually become apparent.

Numerous signs suggest that the current frenzy in the spot and tanker markets is unsustainable. After spiking early last week, oil prices have already pulled back by $10 amid consolidation. The market has priced in expectations for geopolitical cooling this week. However, whether prices ultimately hold a high-level range or continue to shift lower depends on whether the expected resolutions actually materialize. Given the high volatility phase and the upcoming domestic holiday period, market participants are advised to strengthen risk controls and trade cautiously.

Daily Key Data

WTI benchmark crude futures settled down $4.43, or 4.42%, at $95.87 per barrel. Brent benchmark crude futures fell $3.05, or 3.07%, to $96.24 per barrel. INE crude futures dropped 2.26% to 714.3 yuan.

The US dollar index rose 0.21% to 100.42. The USD/CNH exchange rate on the Hong Kong exchange declined 0.06% to 6.6498. The US 10-year Treasury yield rose 0.24% to 106.08. The Dow Jones Industrial Average gained 0.71% to 52,048.83.

Recent Headlines

US Diesel Prices Hit Record High at $6.50

US retail diesel prices have broken above $6.50 per gallon for the first time, extending a war-driven rally that is impacting multiple sectors of the economy. According to data from the American Automobile Association, the national average diesel price reached $6.505 per gallon as of Saturday. This milestone comes less than 10 days after prices last surpassed the $6 threshold. Since September, the pace of diesel price increases has accelerated notably, with prices rising more than 87 cents this month alone, climbing almost daily and significantly exceeding the peak levels recorded in 2022.

Trump Promises Lower Oil Prices Post-Midterms, Yet Chevron CEO Sees No Rapid Decline

With US midterm elections approaching, persistently high fuel prices are dragging on Republican support and have become a major concern for the Trump administration. Trump recently declared emphatically that US oil prices would decline after the midterms. However, Mike Wirth, Chairman and CEO of Chevron, publicly pushed back at an energy conference, stating he sees no possibility of a rapid price decline. Wirth noted that the various adjustment mechanisms used earlier in the Iran conflict to buffer oil supply shocks are now largely exhausted, meaning prices are more likely to rise than fall in the coming months.

Iranian Oil Exports Reportedly Hit Two-Year High Amid Disputed Blockade Claims

Fars News Agency reported on September 20 that despite the US Navy's blockade of Iranian ports, Iran's oil exports over the past 30 days have reached their highest monthly level in two years. The report claimed monthly sales exceeded $3 billion but did not disclose the average daily export volume for the period. The report also cited data from Iran's Plan and Budget Organization showing that oil revenue in the first half of the Iranian calendar year starting March 21 has already exceeded budget estimates. The budget assumed crude and condensate export revenues of approximately $25.4 billion, based on a benchmark price of $54 per barrel and daily exports of about 1.045 million barrels.

The report noted that since mid-July, US forces have implemented a second maritime blockade on southern Iranian ports and vessels and tankers linked to Iran. US Central Command has stated that the blockade has forced dozens of related vessels to turn back or reroute. Earlier this month, after Iran fired anti-ship ballistic missiles at US warships, US forces also attacked at least five Iranian oil tankers. Iran's crude production has declined noticeably since the conflict began. The latest OPEC monthly report shows Iranian crude output at 2.1 million barrels per day in August, down 34% from 3.2 million barrels per day before the US-Israel war in late February. A senior Iranian lawmaker said last month that while exports are difficult, higher oil prices still help increase revenue.

Before the war, oil traded above $70 per barrel, rising above $100 in early March after Iran restricted passage through the Strait of Hormuz. Since early September, prices have mostly remained above $90, briefly touching $100 and currently around $99. The Strait of Hormuz handles roughly 20% of global oil and gas transportation. Since the second blockade began, Iranian officials have offered conflicting statements on oil sales. President Pezeshkian stated that oil that could previously be sold can no longer be exported. Central Bank Governor Hemmati claimed oil revenues have fallen to zero and exports have nearly halted. Oil Minister Paknejad, however, countered that sales continue. China has been the largest buyer of Iranian crude for years, purchasing approximately 90%. Earlier this month, the US threatened sanctions against countries purchasing Iranian oil.