On Thursday, March 7, the international crude oil market continued its recent volatile trend. After a series of large corrections, oil prices briefly entered an adjustment phase. The U.S. government's consideration of intercepting Iranian oil tankers in key waterways to curb Iran's oil supply has affected market sentiment and may impact the raw material supply to China's local refineries, thereby increasing the premium in the Chinese crude oil market. Meanwhile, the Shanghai crude oil futures (SC) market once again outperformed the European and American markets.
Additionally, the United States announced a delay in tariff measures on Canada and Mexico until April, while the European Central Bank implemented its sixth rate cut to boost the economy and mitigate the impact of U.S. tariffs on the market. This has somewhat alleviated concerns about weak demand. However, overall market sentiment remains sluggish, and the downward pressure on oil prices has not been fully alleviated.
Over the past month and a half, international oil prices have fallen by about $15 from their peak this year. Although the decline is not as significant as the same period last year, this drop occurs against the backdrop of the Trump administration's continuous measures to suppress oil prices and the gradual withdrawal of production cuts by OPEC+ (Organization of the Petroleum Exporting Countries and its allies). This has broken the psychological bottom line of the market, leading to greater investor concern compared to last year's significant decline. The market is worried not only about oversupply but also about demand growth falling short of expectations. As a result, positive news has struggled to effectively bolster market confidence, with the continuous decline in oil prices and negative market sentiment creating a feedback loop that further exacerbates investor pessimism.
It is noteworthy that after Wednesday's sharp drop in oil prices, the OPEC+ production cut baseline was breached, and Brent crude oil prices hit a new low since December 2021, further opening the downside potential for oil prices. Market expectations have changed significantly, with institutions gradually reducing their optimistic forecasts for oil prices from the previous $90 target to a lower range, and some even warning that prices could fall to $50.
However, in terms of inventory, the overall global oil market still has low stock levels without clear signs of an inventory buildup. During the sharp drop in oil prices, the spread structure showed some resilience. The current extreme bearish sentiment in the market has been somewhat released, and oil prices may still have a chance to recover in the future. Therefore, market participants suggest exercising caution with excessive shorting operations and closely monitoring subsequent changes in market sentiment. It is expected that the oil market will continue to display significant volatility, and investors should be mindful of the market rhythm.
