**Market Overview**

**Core Perspective: Neutral** Overall volatility remains at low levels with potential for continued fluctuations. There's a tendency for periodic geopolitical speculation, but the primary pattern shows European and American session rallies followed by pullbacks. Current stage considerations include event-driven opportunities for selling on strength or trading volatility compression.

**Macroeconomic Analysis**

August US PCE data aligned with expectations, with the core PCE price index rising 2.9% year-over-year, matching both prior readings and forecasts. While significantly above the Federal Reserve's 2% target, it avoided the market's feared breach of 3%. Monthly figures showed 0.2% growth, slightly below July's 0.3%. Overall PCE registered 2.7% annually and 0.3% monthly, with all four metrics meeting market expectations. August real consumer spending rose 0.4% for the third consecutive month, continuing to exceed expectations. This data boosted overall market risk sentiment, supporting equity rallies while the dollar index declined sharply.

OPEC production increases and ongoing US sanctions on Russian oil have created significant near-term Dubai delivery dynamics. Marginally, Middle Eastern benchmark spot prices show periodic downward pressure, with BDSS contango structure narrowing. Further speculation could potentially tighten Dubai supply availability. Conversely, DFL and EFS price structures reflect market participants' continued tight supply-demand outlook for European and Asian regions. Absolute pricing remains neutral, with attention on subsequent North Sea differential and Brent time spread interactions. Future developments in Russian supply disruptions, if showing marginal moderation, warrant monitoring for potential time spread weakening.

**Supply Factors Analysis**

**OPEC Production: Bearish** September OPEC production continues increasing. Following the Middle Eastern peak burning season, weakening consumption demand translates to export growth, with visible export data showing expansion trends.

**Macroeconomic: Bullish** August core PCE shows no re-inflation impact, reviving rate cut expectations and benefiting risk assets.

**SPR: Neutral** Trump indicates potential reserve purchases during low oil prices, while US and Chinese SPR accumulation proceeds steadily.

**Geopolitics & Sanctions: Bullish** Steel products show modest inventory builds, with total stocks exceeding year-ago levels. Rebar sees slight destocking, billet inventories decline, and hot coil shows modest accumulation.

**Downstream Demand: Neutral** Gasoline and diesel crack spreads strengthen counter-seasonally, improving refinery margins with spot differentials showing strength.

**Shale Production: Neutral** Last week's output reached 13.5 million barrels per day, with rig count stable at 424 units. Rig counts show periodic declining trends, gradually reflecting in production reductions.

**August Core PCE Indicates Controlled Re-inflation**

August core PCE data shows year-over-year growth of 2.9%, meeting expectations and matching prior readings. Monthly gains of 0.2% aligned with forecasts, indicating relatively stable monthly inflation pressures. Component analysis reveals US personal consumption expenditure growth accelerated to 0.3% monthly from July's 0.2%, demonstrating continued consumer economic resilience.

Overall, with inflation remaining relatively controlled, the Federal Reserve will increasingly focus on labor market performance, maintaining strong macroeconomic economic support.

**Russian Refinery Attacks**

**Recent Events Timeline**

Ukraine began systematic attacks on Russian refineries from early 2024, reaching peak intensity in August-September 2025. Attack characteristics include widespread disruption across major refineries from western Russia to Volga region and Ural areas. Coordinated drone and special forces operations targeted strategic objectives over 1,000 kilometers deep.

Recent attacks on core refinery units and related facilities include systematic targeting of key infrastructure components.

**Limited Actual Impact on Crude**

According to Bloomberg statistics, recent four-week average exports reached 2024 highs, with port vessel activity maintaining weekly growth. Disruption situations haven't significantly interrupted exports, with some evidence of forced export increases.

While recent Indian import volumes declined, Indian refiners haven't abandoned Russian crude purchasing plans, with potential future buying interest likely intensifying.

**More Pronounced Product Impact**

Since Russian petroleum product exports primarily originate from producers rather than domestic traders, traditional financial sanctions have limited logistical impact compared to physical attacks.

Petroleum products, particularly diesel and high-sulfur fuel oil, show more pronounced effects. Logistics data indicates declining petroleum product exports, with European high-low sulfur price differentials widening significantly.

**Counter-seasonal Crack Spread Continuation**

**Petroleum Product Crack Spreads Strengthen Counter-seasonally**

Current petroleum product crack spreads trend counter-seasonally stronger, driving continuously rising refinery margins.

Gasoline strength stems from ongoing Dangote refinery gasoline unit failures, with recent worker strikes potentially causing additional operational disruptions. Diesel strength primarily reflects seasonal refinery maintenance and increased heating demand, compounded by recent Russian refinery attacks intensifying current tight conditions.

**North Sea Differential Strengthening**

Optimistic refinery margins begin reflecting in crude differentials. While seasonal maintenance arrives, excluding unexpected factors, current non-emergency maintenance volumes remain below seasonal averages.

Physical purchasing demand receives support, with attention on differential impacts on time spreads - strong physical reality transmitting to weak expectations or weak expectations suppressing strong reality.

**Price Spreads & Positioning**

**WTI and Brent Time Spreads Stage Periodic Rebounds**

As of September 29, WTI front-month spread closed at $0.52/barrel, with 1-6 spread at $1.5/barrel. Brent front-month differential closed at $0.86/barrel, with 1-6 spread at $2.2/barrel. SC front-month spread closed at -1.6 yuan/barrel.

**Gasoline crack spreads remain relatively strong compared to historical periods**

**Diesel crack spreads continue strengthening**

**Jet fuel crack spreads strengthen marginally**

**WTI Fund Net Long Decreases**

Week of September 23: WTI fund long positions decreased 13,700 contracts, shorts decreased 3,386 contracts, with net long declining 10,320 contracts.

**Brent Fund Net Long Decreases**

Week of September 23: Brent fund long positions decreased 8,266 contracts, shorts decreased 239 contracts, with net long declining 8,027 contracts.