Supply Expected to Continue Expanding, Oil Prices May Remain Under Pressure During Holiday Period

Deep News
Sep 30

I. Commodity Fundamentals

From a fundamental perspective, recent objective changes in crude oil market commodity attributes have not been direct, while long-term expectations involve considerable variables. On one hand, OPEC+ countries led by Saudi Arabia continue to implement their previous production increase policies, with reports suggesting the organization still plans to increase production again during the National Day holiday period. Considering that Saudi Arabia has already unexpectedly lowered crude oil prices for Asian markets, this further demonstrates the organization's demand for market share. Under such circumstances, the largest oil-producing organization is unlikely to see production-related changes. Meanwhile, regarding the US and Russia, the former has recently shown signs of production recovery. With OPEC+ increasing production and cutting prices to compete for market share, the US is also unlikely to significantly reduce production to ensure its petroleum exports. The latter, under US sanctions, has essentially had all sales channels to European countries cut off, which may lead to large amounts of Russian oil flooding into the Asia-Pacific market, further intensifying competition with OPEC+ countries for market share and further suppressing oil price performance. From the consumption side, as the Northern Hemisphere summer ends, gasoline consumption will further decline. Combined with the fact that manufacturing performance in core consuming economies like China and the US remains in contraction territory, this may make it difficult for subsequent crude oil demand to serve as a price support factor. Therefore, in terms of commodity attributes, oil prices during the holiday period may be dragged down by these factors, making it difficult to see significant upward momentum.

II. Financial & Political Attributes

On the macro front, within financial attributes, although the Federal Reserve implemented rate cuts as expected, market reception of this result has been less than ideal. Following Powell's cautious remarks and the successive release of US economic data, market expectations for rate cuts in the remaining time this year have gradually decreased, instead increasing bets on cuts next year. This may result in no significant improvement in the overall macro environment during the holiday period. Additionally, previous US labor market data once raised concerns about the economy falling into recession, making the US non-farm payrolls data during the October holidays critically important and worthy of attention.

Regarding political attributes, recent geopolitical conflicts in both the Middle East and Eastern Europe regions involve varying degrees of uncertainty. In the Middle East, the geopolitical conflict centered on Israel has not subsided recently but has intensified as Israel has stepped up attacks on surrounding areas. After Netanyahu attended the UN meeting last week, condemnation of Israel by major global political entities has become increasingly strong, which may increase the possibility of Middle Eastern oil-producing countries being affected during the National Day holiday. However, with recent meetings between the US and Israel, there is a considerable possibility of achieving a ceasefire agreement in the Middle East, which may have a significant cooling effect on geopolitical tensions subsequently. Regarding Russia, as US-Russia relations gradually deteriorate, the US has also strengthened its calls for other economies to stop purchasing Russian oil, which may keep the Russia-Ukraine conflict in a stage that is difficult to cool down in the short term, requiring cautious attention.

III. Inventory

On the inventory side, for crude oil, US API crude oil inventory for the week ending September 12 recorded -3.42 million barrels, compared to an expectation of -1.565 million barrels and a previous value of 1.25 million barrels. Simultaneously, EIA crude oil inventory for the week ending September 12 recorded -9.285 million barrels, compared to an expectation of -0.857 million barrels and a previous value of 3.939 million barrels, marking the largest decline since the week ending June 13, 2025. This round of inventory data showed an unexpectedly large inventory draw, primarily due to a significant increase in US crude oil exports last week, reaching the highest level since the week ending December 29, 2023, while production did not increase. Although this situation provided some short-term support for oil prices, it did not cause significant market impact, and the likelihood of continuation is relatively low. For refined products, US gasoline inventory for the week ending September 12 recorded -2.347 million barrels, compared to an expectation of 0.68 million barrels and a previous value of 1.458 million barrels. Meanwhile, distillate fuel inventory recorded 4.046 million barrels, compared to an expectation of 0.975 million barrels and a previous value of 4.715 million barrels. From a refined products perspective, the market is currently in the seasonal phase of gasoline inventory draws and distillate builds, while refinery utilization rates have slightly declined compared to previously, leading to deeper gasoline inventory draws that generally meet market expectations. However, the significant accumulation in distillate fuel inventory exceeded market expectations, further indicating poor current consumption conditions, which may continue to drag on oil prices in the fourth quarter.

IV. Views and Outlook

Overall, the operational logic for oil prices during the National Day holiday will no longer rely solely on fundamental performance, as uncertainties in financial and political attributes will also significantly impact oil prices. However, the core logic of medium to long-term pressure on oil prices has not been fundamentally improved. Considering that geopolitical conflicts in the Middle East region remain highly volatile, this may lead to further expansion in oil price volatility during the holiday period. Therefore, it is recommended to reduce positions in a timely manner or hold light positions before the holiday to avoid volatility risks. Aggressive traders may cautiously establish short positions on rallies recently. This is for reference only.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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