Crude oil price movements are clearly conveying a message: the market is in a strong, yet chaotic, accumulation phase. Geopolitics remains the primary source of uncertainty. According to the schedule, Israeli Prime Minister Netanyahu is set to meet with US President Trump at the White House on Wednesday, local time. The first two trading days of this week, falling within an information vacuum prior to this meeting, saw oil prices maintain a volatile, back-and-forth pattern as they await further directional cues. President Trump stated regarding Iran that the options are either reaching an agreement or the US having to take very strong measures. He emphasized that Iran will not possess nuclear weapons or missiles. Should US-Iran negotiations fail, another aircraft carrier strike group might be dispatched to the Middle East. The second round of US-Iran talks is anticipated for next week, and developments in the Iranian situation will continue to be a key factor closely watched by the market.

On the fundamental supply and demand front, ample supply remains the baseline for the crude oil market. However, various factors disrupting supply early in the year reduced downward pressure on prices. Recently, with the conclusion of the North American cold wave and the restoration of production in Kazakhstan, the bearish pressure from returning supply deserves attention. The API reported a significant crude inventory build of 13.4 million barrels for the week ending February 6th. Attention is on the upcoming EIA data; if it also shows a substantial build, it is expected to exert further pressure on oil prices. Additionally, it is noteworthy that the European and US diesel markets have cooled, showing weaker performance than crude oil itself.

The ability of crude oil to maintain a relatively strong, range-bound tug-of-war over the past two weeks is primarily attributed to the potential risk of an escalation in geopolitical tensions. From a technical perspective, oil prices are clearly showing signs of being overbought and in need of a correction. Driving prices higher would require more potent bullish catalysts. In the absence of sufficiently strong positive factors, a price adjustment during the Spring Festival holiday period appears likely. However, compared to a mere correction, the market is more concerned about the risk of geopolitical events spiraling out of control. The timing coincides with the Chinese Spring Festival holiday window. Given the uncertainty surrounding the US-Iran talks during this period, oil prices are in a phase of high volatility, susceptible to sudden, unexpected movements driven by geopolitics. It is advisable to implement risk control measures in advance, consider appropriately reducing position sizes, and participate with caution.

Daily Market Movements: WTI crude futures fell by $0.40, or 0.62%, settling at $63.96 per barrel. Brent crude futures declined by $0.24, or 0.35%, settling at $68.80 per barrel. INE crude futures edged up 0.21%, closing at 473.5 yuan. The US Dollar Index was nearly flat, up a marginal 0.01% to 96.86. The Hong Kong Exchange USD/CNY rate fell 0.17% to 6.8953. The US 10-year Treasury yield was unchanged. The Dow Jones Industrial Average gained 0.1% to close at 50,188.14.

Recent Key Developments: Venezuela's crude oil production is recovering rapidly, with total output approaching 1 million barrels per day. According to informed sources, the state-owned PDVSA has largely restored production at its own fields and joint venture projects in the Orinoco Belt, the country's core oil-producing region, pushing national crude output close to 1 million bpd. Current production in this region exceeds 500,000 bpd, an increase of over 100,000 bpd since early January. Previously, due to US oil sanctions, Venezuela was forced to cut production in December, leaving millions of barrels stranded in onshore storage tanks and on tankers. As exports have gradually returned to near-normal levels recently, PDVSA has begun phasing out the production cuts. Data shows the country's crude production fell to a low of 880,000 bpd in early January, compared to 1.16 million bpd in late November. Sources indicate that US Energy Secretary Wright plans to visit Caracas this week to discuss a $100 billion reconstruction plan proposed by Washington following the arrest of Maduro. This visit comes as Venezuela's energy production and foreign cooperation enter a critical adjustment period under the US-backed interim government.

Middle East crude oil benchmark prices held steady, supported by an improved demand outlook driven by Indian refiners' purchases aimed at replacing Russian barrels. Indian refiners are avoiding purchases of Russian crude for April delivery and are expected to steer clear of such deals for an extended period, a move that could facilitate a trade agreement between New Delhi and Washington. Indian state-run refiner Bharat Petroleum bought 2 million barrels of Omani and Al Shaheen crude from Vitol for delivery between April and early May, at a premium of approximately $2 per barrel to the April Dubai crude price. Mangalore Refinery and Petrochemicals also issued a tender on Monday seeking to buy 1 to 2 million barrels of crude. The market is also awaiting Saudi Arabia's official selling prices for Asian customers for March, seen as an indicator of demand strength. This follows Saudi Aramco's fourth consecutive monthly price cut for its Arab Light crude sold to Asia. The spot Dubai crude premium to swaps fell by 3 cents to 77 cents per barrel. Trafigura and PetroChina are each set to deliver a cargo of Upper Zakum crude for April loading to TotalEnergies.

Uncertainty remains over whether India will halt purchases of Russian oil. While Trump stated India would stop buying Russian oil, Indian officials have not confirmed this. Market consensus leans towards a "gradual reduction" rather than an "abrupt halt," given entities like Nayara Energy's high reliance on Russian crude and the significant discount of Urals crude (at least ~$8/barrel cheaper) compared to similar Middle Eastern grades. Kpler data shows India's Russian oil imports fell to around 1.1 million bpd in January, the lowest since November 2022, but six Urals cargoes have discharged in India so far in February, indicating demand persists.

The Middle East crude market structure shows slight strength. Recent Indian purchases of March-loading Middle Eastern crudes have increased, pushing the Dubai market structure into backwardation. The premium for Murban crude rose to around $2.55 per barrel against Dubai swaps, a three-month high.

Iranian supply remains a potential source of pressure. Iran's exports were approximately 1.4 million bpd in January, but floating and in-transit storage inventories climbed to around 180.4 million barrels. In an extreme scenario, this could cover Chinese teapot refiners' import needs for about 4-5 months, indicating supply flexibility remains. China's intake of Iranian oil has weakened, with imports dropping to about 927,000 bpd in January, primarily due to cheaper Russian crude squeezing market share. For March delivery to China, Urals is priced around $11 per barrel below ICE Brent, while Iranian Light is around $10.50 lower. This narrow price differential will directly influence the competition for market share. On shipping and compliance, while Malaysia has released a tanker involved in Iranian oil trades, risks associated with the "shadow fleet" and ship-to-ship transfers persist.