Against the backdrop of a dramatic turn in the geopolitical situation over the weekend, Brent crude oil futures plummeted by more than 5% within a few minutes of opening on Monday; the main WTI crude oil futures contract fell more than 6% at the opening of the market, falling below 84 US dollars/barrel at one point. The main domestic crude oil contract once fell to 540.5 yuan/barrel during the intraday period, hitting a decline of 8.82%. The week before, Brent crude had just broken through the $100 mark, and in just a few days it had dropped more than $10 from its high point. The direct trigger for the dramatic change in the market was the sudden suspension of US military attacks on Iran. According to Xinhua News Agency quoting the US Axios News website, US President Trump ordered on the 24th that the US military not to launch attacks on Iran that day, breaking the previous situation where the US military launched air strikes against Iraq for 13 consecutive days. Iran has also sent a signal of mitigation. A senior Iranian official said that as long as the US stops military attacks, Iran will also stop military operations. Furthermore, according to some sources, Pakistan is pushing for the resumption of negotiations between the US and Iran, and market expectations for an easing of the situation in the Middle East are rapidly heating up. Looking at the future market, short-term oil price trends may be highly dependent on the next evolution of the situation in the Middle East. If substantial progress is made in diplomatic negotiations, the geo-risk premium may subside further, and oil prices may continue to be revised downward; however, supply-side structural support still exists — shipping risks in the Strait of Hormuz and the Red Sea have not been completely lifted, the Yemeni Houthis are still attacking Saudi Red Sea port oil facilities. Furthermore, the pace of the price reversal brought about by the TACO reversal is also difficult to grasp. Until the situation is clear, high volatility is expected to become the norm, and risk premiums may rise again after the geographical narrative is clear.

Against the backdrop of a dramatic turn in the geopolitical situation over the weekend, Brent crude oil futures plummeted by more than 5% within a few minutes of opening on Monday; the main WTI crude oil futures contract fell more than 6% at the opening of the market, falling below 84 US dollars/barrel at one point. The main domestic crude oil contract once fell to 540.5 yuan/barrel during the intraday period, hitting a decline of 8.82%. The week before, Brent crude had just broken through the $100 mark, and in just a few days it had dropped more than $10 from its high point. The direct trigger for the dramatic change in the market was the sudden suspension of US military attacks on Iran. According to Xinhua News Agency quoting the US Axios News website, US President Trump ordered on the 24th that the US military not to launch attacks on Iran that day, breaking the previous situation where the US military launched air strikes against Iraq for 13 consecutive days. Iran has also sent a signal of mitigation. A senior Iranian official said that as long as the US stops military attacks, Iran will also stop military operations. Furthermore, according to some sources, Pakistan is pushing for the resumption of negotiations between the US and Iran, and market expectations for an easing of the situation in the Middle East are rapidly heating up. Looking at the future market, short-term oil price trends may be highly dependent on the next evolution of the situation in the Middle East. If substantial progress is made in diplomatic negotiations, the geo-risk premium may subside further, and oil prices may continue to be revised downward; however, supply-side structural support still exists — shipping risks in the Strait of Hormuz and the Red Sea have not been completely lifted, the Yemeni Houthis are still attacking Saudi Red Sea port oil facilities. Furthermore, the pace of the price reversal brought about by the TACO reversal is also difficult to grasp. Until the situation is clear, high volatility is expected to become the norm, and risk premiums may rise again after the geographical narrative is clear.