October 23rd, according to reports
On October 22, local time, international crude oil futures closed sharply higher, with Brent crude surging 4% in a single day to finish above $113 per barrel—the highest settlement price since May 4. WTI crude also advanced, while refined products followed suit. The primary driver of this rally is the reassessment of supply risks triggered by the escalation of tensions in the Middle East. Meanwhile, a complex interplay of bullish and bearish factors—including signals from Russia-Ukraine negotiations, localized supply disruptions in certain regions, and improving profit margins at European and U.S. refineries—has pushed the oil market into a phase of heightened volatility.
I. Market Performance: Crude Oil Leads Gains, Refined Products Follow Strongly
At 2:30 p.m. New York time on October 22 (2:30 a.m. Beijing time the following day), at the close: NYMEX December WTI crude oil rose $2.32, up 2.4%, settling at $99.47 per barrel; ICE December Brent crude oil gained $4.35, up 4.0%, settling at $113.17 per barrel.
December RBOB gasoline: up 5.03 cents, a 1.66% increase, at $3.0893 per gallon; December heating oil: up 15.94 cents, a 3.48% increase, at $4.7366 per gallon; the price gain in heating oil was markedly larger than that of crude oil and gasoline, reflecting growing market concerns over tight winter distillate supplies; Brent’s outperformance relative to WTI also underscores the greater sensitivity of global benchmark oil prices to geopolitical disruptions in the Middle East.
II. Trend Analysis:
Key Factor: Escalation of the Middle East Conflict, with Risk Premium as the Dominant Theme
The direct factor for this round of oil price increases is the Houthi attack on Saudi energy infrastructure, with Saudi Aramco requesting employees to evacuate from its headquarters in Dharan along the Persian Gulf coast. The market is beginning to reprice the risk of supply disruptions in the core production areas of the Gulf. Analysts believe that the market is factoring in new, large-scale geopolitical risk premiums. In addition to the Houthi attacks on Saudi Arabia, the market is also trading on expectations that the United States and Israel may take joint action against Iran after the midterm elections.
Notably, actual export data have not yet shown a sharp decline. Morgan Stanley estimates that last week’s Middle Eastern crude oil exports averaged around 17 million barrels per day, only slightly below the 12‑month pre‑conflict average of 18 million b/d. Analysts argue that even if total exports exceed expectations, incidents such as attacks on vessels in the Strait of Hormuz and targeted strikes against Saudi oil facilities are sufficient to offset any bearish impact from a modest resumption of supply.
Mandeb Strait and the Strait of Hormuz are two major chokepoints for global crude oil shipping. The continuous harassment by the Houthi forces in the Red Sea route, if both channels were to be simultaneously and continuously impacted, would directly threaten the global circulation of crude oil. At this stage, it is not a case of large-scale supply disruption, but rather the market preemptively pricing in the risk of "further spillover of conflict," which is also the main reason for the rapid surge in oil prices and their entry into an overbought condition.
Bull-Bear Dynamics: Russia and Ukraine Signal Intentions to Negotiate, Creating a Key Counteracting Factor
Counteracting the heightened tensions in the Middle East, recent intensive diplomatic engagements between Russia and Ukraine have sown latent downside expectations for the oil market. U.S. Special Envoy Witzke has held successive meetings with the presidents of Ukraine and Russia. The Russian side has indicated its readiness to resume trilateral talks among Russia, the United States, and Ukraine in mid-November, aiming not merely at a short-term ceasefire but at charting a regional security framework for the post-conflict era. Meanwhile, the Ukrainian side has also stated its willingness to advance a ceasefire—and an energy-related ceasefire—based on a freeze of the status quo and robust security guarantees.
Here, a classic contradiction emerges: while negotiation signals should theoretically put downward pressure on oil prices, ground operations continue, Ukrainian energy infrastructure remains under attack, and the conflict shows no sign of de‑escalation. From a long-term supply perspective, Russia is the world’s third-largest crude producer; since the outbreak of the Russia–Ukraine conflict, sanctions targeting Russian energy have kept oil prices elevated. Should a sustainable peace agreement eventually be reached, it cannot be ruled out that Russian crude exports would rebound, exerting medium- to long-term downward pressure on oil prices.
Meanwhile, Russia is lobbying the European Union to temporarily suspend its ban on Russian LNG imports, citing low levels of gas storage in Europe and heightened energy vulnerability. Meanwhile, under pressure from the United States, France, and other countries, the European Parliament has postponed the implementation of rules on methane emissions from oil and gas operations by three years, thereby easing, to some extent, the short-term compliance‑cost pressures faced by European energy companies and indirectly slowing the pace at which Europe proactively reduces its oil and gas purchases.
Other factors: Strong refinery profits, renewed supply uncertainties in Libya
U.S. refiner Valero was the first to release its earnings report, posting its highest-ever quarterly profit—well above market expectations. This underscores that, amid supply disruptions in the third quarter, refining margins remained robust, while also highlighting the continued tight balance in the refined‑products market, which is supporting oil prices.
In addition, Libya’s National Oil Corporation announced that valves on the pipelines connecting the Hamada and Tahrir oilfields to the port of Zawiya have been shut, leading to a decline in production at both fields. Libyan crude supply has historically been highly volatile; as an incremental source within OPEC that is not subject to strict quota constraints, such unexpected production outages provide temporary support to oil prices.
III. Market Outlook: Geopolitical Factors Drive the Market, Amplifying Volatility Risks
In the short term, the core contradiction in the oil market remains focused on the geopolitical situation in the Middle East. As long as there is an expectation of escalating tensions between the Houthis and Saudi Arabia, and between the US and Iran, the risk premium will remain high, making it likely for crude oil to maintain a strong and volatile trend. However, this trend is highly dependent on news-driven events. If subsequent attacks do not escalate further and shipping channels remain open, the previously quickly factored-in premium may be rapidly reversed, leading to a potential correction in oil prices.
In the medium term, two key variables will warrant close attention: first, whether the trilateral Russia-Ukraine talks can materialize and whether a substantive ceasefire agreement emerges, as this will determine the elasticity of Russian crude oil supply; second, with winter approaching, demand for distillate fuels in Europe and North America, along with European natural gas inventory levels, will continue to influence the correlated performance of heating oil, natural gas, and crude oil.
Overall, the current oil price has entered a high-volatility period dominated by news. The fundamental export data from China is weak, which is bullish, but sentiment and risk pricing are taking the upper hand, increasing the risk of wide price fluctuations in the future.
