**Macro and Commodities**

**Summary**

Over the past month, oil prices have exhibited narrow-range fluctuations, concentrated within a 475-500 yuan per barrel band, representing only a 5% trading range.

Currently, oil prices are trapped in a narrow trading corridor, facing significant upward pressure from continued OPEC production increases and challenging global macroeconomic conditions. Particularly noteworthy is OPEC's production expansion strategy - should oil prices sustain a breakout above $70 per barrel, OPEC will likely accelerate production increases further. Conversely, downward price movements encounter resistance from geopolitical disruptions. Given that both the Russia-Ukraine conflict and Middle Eastern tensions remain unlikely to reach decisive resolution in the near term, oil prices will probably continue operating within the 470-500 yuan per barrel range. Considering seasonal demand decline, a bearish trading approach is recommended.

**Risk Factors** - Geopolitical volatility affecting supply dynamics - Rapid initiation of US interest rate cutting cycle - Substantial improvement in international macroeconomic demand

**Main Analysis**

Recent month oil price movements have demonstrated narrow-range volatility, confined to approximately 5% within the 475-500 yuan per barrel corridor.

**I. Russia-Ukraine Conflict Draws Market Focus**

While the Russia-Ukraine conflict has persisted since 2022, its impact on oil prices has remained relatively contained, as neither side has extensively targeted energy infrastructure. Additionally, beyond implementing the $60 price cap sanctions in 2022, Western nations have not imposed additional restrictions on Russian crude exports. This has somewhat diminished the conflict's presence in crude oil markets. However, war initiation typically triggers significant oil price surges, and current late-stage developments are producing similar effects.

Ukraine has intensified attacks on key Russian export ports and refineries. Regarding ports, Ukrainian drones have struck two major Baltic Sea facilities - Ust-Luga and Primorsk ports - disrupting petroleum shipments and causing daily losses exceeding $40 million. Concerning refineries, Ukrainian drone attacks have targeted at least 10 facilities, temporarily reducing Russian refining capacity by nearly one-fifth. Pipeline infrastructure has also suffered, with 12 attacks on the "Druzhba" pipeline (Russia's energy artery to Europe), forcing Hungary and Slovakia to activate emergency reserves. Baltic Sea pumping station network damage has reduced Russian crude export route efficiency by 40%.

These attacks have created domestic fuel shortages in Russia, driving up gasoline and diesel prices. Since year-beginning, gasoline prices have risen 40-50%, reaching historic highs in August at 72,600 rubles per ton of 92-octane gasoline (approximately $524). Russia's August petroleum export revenue fell to a five-year low of $13.5 billion.

Potential Western sanctions add additional crude market risks. At the G7 meeting, the US urged Europe to join in imposing secondary sanctions tariffs up to 100% on countries continuing Russian oil imports, while demanding Europe cease Russian oil and gas purchases and substitute with US supplies.

Short-term developments show various parties applying pressure to promote ceasefire agreements, while both sides increasingly target energy infrastructure. Russian August export revenues decreased 6.4% month-over-month to $13.51 billion, down 8.5% year-over-year to five-year lows. High-frequency data shows Russian seaborne crude exports averaged 3.18 million barrels daily for the week ending September 14, declining 934,000 barrels from the previous week - the largest single-week drop since July last year. Future focus centers on Western sanctions implementation against Russia.

**II. OPEC Production Enhancement**

The Organization of Petroleum Exporting Countries (OPEC) began gradual production increases from April, aiming to balance global crude supply-demand relationships and stabilize market prices. Production acceleration became evident during July, August, and September. OPEC is projected to increase total output by 1.8 million barrels daily in 2025 - a substantial scale. Previous voluntary production cuts by member nations will gradually phase out, creating space for expansion. The UAE announced additional increases of 300,000 barrels daily, demonstrating determination to expand market share.

October will see another OPEC production increase of 137,000 barrels daily, part of the gradual withdrawal from the additional voluntary 1.65 million barrel daily reduction plan announced in April 2023. Since April 2025, OPEC+ has cumulatively increased production approximately 2.5 million barrels daily, representing 2.4% of global demand. This expansion further indicates strategic shift from "protecting oil prices" toward "competing for market share."

OPEC's current stance remains flexible, maintaining openness regarding future production increases. Focus should center on oil price performance - if prices maintain current levels, November will likely see continued 137,000 barrel daily increases. However, should prices fall below $60, OPEC may pause production expansion. The next meeting is scheduled for October 5.

**III. Interest Rate Cutting Cycle Cannot Provide Substantial Benefits**

On September 18, the Federal Reserve cut rates by 25 basis points as expected. The latest dot plot indicates Fed officials' median expectation of two additional rate cuts this year (25 basis points each), one more than June projections. Officials anticipate that following three 2025 cuts, 2026 and 2027 will each see 25 basis point reductions.

Historically, since 1983, the Fed has completed seven tightening-easing cycles. Examining CPI data and oil price changes from cycle initiation to conclusion reveals that during each tightening cycle, endpoint CPI exceeded initial levels. Similarly, during each easing cycle, endpoint CPI fell below starting points. This contradicts conventional understanding that rate hikes reduce CPI while cuts increase it, suggesting that tightening-easing endpoints are not signaled by clear CPI trends but rather by signs of peaks or troughs, typically around one quarter in advance. Rate adjustments serve counter-cyclical regulatory functions without altering cycles themselves, only reducing fluctuation amplitude.

Interest rate policy represents a background factor, primarily indicating current economic environment and policy direction. While each rate cut during easing cycles supports oil prices, such policy implementation inherently suggests Fed recognition of economic downtrends.

**IV. Conclusion**

Oil prices currently trade within narrow ranges, facing upward breakthrough pressure from continued OPEC production increases and challenging global macroeconomic conditions. OPEC expansion particularly threatens sustained price breakouts above $70, likely triggering accelerated production increases. Downward movements encounter geopolitical disruption resistance. Given that Russia-Ukraine conflict and Middle Eastern issues remain unlikely to achieve decisive resolution near-term, oil prices will probably continue operating within the 470-500 yuan per barrel range. Considering seasonal demand decline, bearish positioning is recommended.

**Report Information** "Crude Oil Trading in Narrow Range with Resistance at Both Levels" External Release Date: September 19, 2025 Publishing Institution: Shenyin Wanguo Futures Co., Ltd.

Energy & Chemicals Analyst: Dong Chao Qualification Number: F3030150 Trading Advisory Number: Z0012596

Contact Person: Xue Hexiang Qualification Number: F03115081 Trading Advisory Number: Z0022482