September 22 report:
On Monday, September 21, the international crude oil market experienced a notable pullback. The risk premium stemming from earlier geopolitical tensions in the Middle East rapidly dissipated, driving both major benchmark crude prices sharply lower and pushing them to their lowest levels since September 9. The energy sector as a whole weakened. At the heart of this decline is the market’s growing optimism that Middle Eastern tensions are easing and crude supplies are recovering, fundamentally reversing the previous trading dynamic fueled by supply fears.
I. Market Performance
On September 21, international crude oil futures closed lower. The U.S. WTI crude oil futures November contract settled at $92.37 per barrel, down $3.71, or 3.9%. Brent crude oil futures December contract settled at $103.87 per barrel, down $3.05, or 3.1%.
Refined oil prices edged lower in tandem: November RBOB gasoline futures fell 1.85% to $3.1954 per gallon; November heating oil futures dropped 2.83% to $4.7075 per gallon; natural gas futures closed slightly lower, as overall energy market sentiment weakened across the board.
2. Trend Analysis
Key Factor: Geopolitical diplomacy has reached a turning point, and the market risk premium has fallen sharply.
This round of oil price decline is primarily due to the rising expectations of a easing of geopolitical tensions in the Middle East, with the market's focus shifting from "supply disruption panic" to "situation cooling and supply recovery." The President of Iran will travel to the United States on September 22 to attend a meeting. U.S. President Trump has publicly stated his willingness to meet with the Iranian President. Meanwhile, Iran has conveyed clear conditions for restarting negotiations to the mediator, marking a substantive diplomatic breakthrough in the ongoing confrontation between the U.S. and Iran.
Market institutions generally interpret this diplomatic interaction as a key signal of a turning point in the situation. Analysts point out that the market widely bets that this conference will promote substantial diplomatic progress in the Iranian conflict; relevant institutional figures state that the resumption of dialogue between the United States and Iran is an important breakthrough in easing the situation, and the previously difficult-to-implement peace talks now have the possibility of being realized, directly significantly reducing the geopolitical risk premium of crude oil.
Supply Side: Ongoing supply-side recovery continues to cap oil prices
In addition to easing geopolitical tensions, the continued restoration of crude oil export capacity in the Middle East has thoroughly alleviated market concerns about supply shortages, providing significant fundamental support for downward pressure on oil prices.
First, Saudi crude oil exports have rebounded markedly: shipments through the Strait of Hormuz, which had been temporarily disrupted by Houthi attacks, are steadily recovering. Saudi Aramco has proactively adjusted its export routes, significantly boosting volumes transiting the Strait of Hormuz to offset the shortfall caused by constrained operations at the Red Sea port of Yanbu. Data show that over the past six days, average daily crude flows through the Strait of Hormuz have reached 2.9 million barrels, far above the August low of 700,000 b/d; on Sunday alone, approximately 14 million barrels were loaded onto seven supertankers, signaling a rapid recovery in export capacity.
Second, the offsetting effect of localized supply disruptions is limited: Although the Houthi forces continue to target energy facilities in Riyadh and Yanbu, and hostilities in the Middle East have not yet come to a complete halt, these attacks have not resulted in any new large-scale production shutdowns. Coupled with the risk‑hedging provided by Saudi Arabia’s diversification of transport routes, the impact of these localized disruptions on the market has been significantly muted.
Finally, Libyan supply saw a modest decline: Libya’s Sharara oilfield experienced a partial production cut, but there are currently no large-scale shutdowns or force‑majeure risks, so the impact on the global supply landscape remains limited and fails to offset the positive effect of the broader recovery in Middle Eastern supply.
Inventory Side: U.S. Strategic Petroleum Reserve Hits a 44-Year Low, Providing Bottom Support
According to the latest data from the U.S. Department of Energy, as of the week ending September 18, the U.S. Strategic Petroleum Reserve (SPR) fell to 284.6 million barrels, the lowest level since October 1982. This continued decline in inventories stems from the U.S.’s planned release of 172 million barrels from its strategic reserves. Persistently low stockpiles have provided a firm floor for oil prices, limiting the depth of the current pullback and helping to prevent a sharp, one-sided downward move.
III. Market Outlook: High-Level Volatility and a Pullback, with Intensified Long-Short Competition
Crude oil analysts believe that, in the short term, oil prices will likely remain in a weak‑to‑sideways range as the geopolitical risk premium unwinds. With the market currently pricing in bearish factors—namely, easing U.S.–Iran diplomatic tensions and expectations of a recovery in Middle East supply—there is still some room for a modest pullback in oil prices in the near term.
In the medium to long term: The situation in the Middle East still carries uncertainties, with the Houthi forces continuously attacking energy facilities and the results of US-Iran negotiations yet to be finalized; geopolitical risk factors have not been completely eliminated. At the same time, the supply side and inventory levels also need a long-term recovery, especially since the U.S. strategic crude oil reserves are at historically low levels, and global crude oil inventories as a whole are relatively tight, which will continue to support oil prices, limiting the potential for a significant decline.
