Geopolitical Risks Ease & Demand Weakens—Crude Oil Slides to a Phase-Low Level

June 10th, News

On June 9, international crude oil prices fell significantly, with price declines exceeding 3%, both hitting new phase lows. Crude oil futures also closed lower in tandem. The core reason behind this round of oil price weakness lies in the phased easing of geopolitical tensions in the Middle East and the rapid dissipation of the geopolitical risk premium. Meanwhile, multiple factors—such as weak global crude oil supply-and-demand fundamentals and disruptions to key shipping lanes—are intertwining, causing the oil market to exhibit a pattern of "sharp declines followed by modest rebounds, with intensified price volatility."

I. Market Performance: International oil prices closed sharply lower, hitting a seven-week low.

On Tuesday, crude oil futures closed significantly lower, with the two benchmark crude oils posting their lowest settlement prices in recent periods. The July WTI crude oil contract fell by $3.10, a price decrease of 3.4%, settling at $88.20 per barrel—the lowest level since May 29. Meanwhile, the August Brent crude oil futures dropped by $2.80, representing a price decline of 3.0%, and settled at $91.45 per barrel, the lowest level since April 17. At the same time, Brent crude has fallen below its 100-day moving average—a key technical support level—for the first time since January of this year, signaling a shift to weaker market trends.

Finished oil prices declined in tandem; in July, RBOB gasoline and heating oil futures both fell by 1.61%, with settlement prices of $3.0211 per gallon and $3.5418 per gallon, respectively, mirroring the synchronized decline in crude oil prices.

II. Trend Analysis: The easing of tensions has led to the disappearance of the premium, while localized frictions and disruptions to shipping continue to disrupt the market.

Core Driver: The Middle East conflict has entered a phased ceasefire, causing risk premiums to fall rapidly.

The easing of the geopolitical situation in the Middle East is the main factor behind the sharp drop in oil prices this time. Previously, the exchange of fire between Iran and Israel heightened market concerns about disruptions to energy supplies, with geopolitical premiums continuously supporting oil prices. On June 9th, both sides announced a halt to mutual attacks, directly reversing market sentiment. Coupled with the U.S. indicating that negotiations between the U.S. and Iran are in their final stages and the conflict may end in the short term, this further accelerated the decline in oil prices.

Energy consulting firm Ritterbusch and Associates also noted that the de-escalation of regional conflicts has been a direct driver behind the oil market’s pullback, and market expectations regarding extreme supply risks have significantly cooled. However, Iran has also stated that if Israel continues to expand its actions, it will respond with even stronger measures, meaning the underlying risk of conflict has not been completely eliminated.

Market Fluctuations: Local Tensions Resurface, Oil Prices Rebound Slightly in Late Trading

The ceasefire has not yet brought about complete stability in the regional situation; sporadic skirmishes have once again triggered risk-aversion sentiment, prompting oil prices to rebound from their intraday lows. On the 9th, Israel launched an air strike on southern Lebanon, and shortly afterward, the U.S. side claimed that Iran had shot down a U.S. military helicopter in the Strait of Hormuz, adding that it would respond accordingly.

Consecutive unexpected events have heightened market tensions, offsetting some of the decline. It is evident that the current situation in the Middle East is highly volatile, and it will continue to disrupt oil price trends in the short term, also to some extent limiting the downward space for oil prices.

Logistics Bottleneck: Strait Shipping Disrupted, Oil Tanker Stranding Issues Persist in China

As a global energy transportation chokepoint, the Strait of Hormuz handles one-fifth of the world's crude oil and liquefied natural gas shipments. Currently, the passage issues remain prominent. Since the outbreak of conflict at the end of February, the shipping order has been disrupted. As of June 9, more than 160 mainstream oil tankers have been stranded in the Persian Gulf waters, with the duration of the stranding exceeding 100 days.

Although the U.S. Secretary of Energy has noted a noticeable rebound in shipping traffic through the strait and the U.S. side has also taken control of Iranian ports, a full resumption of shipping will still take time. Persistent logistical bottlenecks continue to hamper the efficiency of crude oil circulation, serving as a key factor supporting the bottom level of oil prices.

Supply and Demand Fundamentals: Demand Has Weakened Significantly, Putting Synchronized Pressure on the Global Supply-Demand Landscape

Weak demand continues to fuel the downward trend in oil prices. In May, China—the world’s largest crude oil importer—imported 33.0808 million tons of crude oil, a year-on-year decrease of 29%. From January to May, cumulative imports totaled 218.3639 million tons, down 4.8% year-on-year. The sharp contraction in import demand is directly weighing on international oil prices.

On Tuesday, data from the U.S. Energy Information Administration (EIA) forecast that global oil supply and demand will both decline in 2026: daily production is expected to fall to 99 million barrels, down from last year’s historic peak of 106.1 million barrels in 2025; daily demand is projected to drop to 102.9 million barrels, also lower than last year’s level. Against the backdrop of weakening supply and demand, countries are starting to draw down crude oil inventories. It is anticipated that crude oil inventories held by OECD member countries will fall to their lowest levels since the EIA began collecting such data, potentially leaving future supply with insufficient flexibility.

III. Outlook for the Future Market: Oil Prices Enter a Wide Range of Volatility, with Multiple Variables to Watch

According to crude oil analysts, the current oil market is in a complex environment characterized by a decline in geopolitical risks, weak fundamentals, and recurring local conflicts. In the short term, the evolution of the situation in the Middle East and the progress of shipping resumption in the Strait of Hormuz remain the core factors influencing oil price fluctuations; in the medium to long term, changes in global crude oil supply and demand, import data from major consuming countries such as China, and the potential risks posed by low inventories will determine the central level of oil prices.

Overall, international oil prices will maintain a wide-range fluctuation pattern in the short term, and do not currently have the conditions for a unilateral sharp rise or fall. The market needs to continuously monitor geopolitical events, logistics and transportation, as well as changes in global crude oil supply and demand.