October 26th News
On Friday, October 23, New York time, international crude oil futures closed sharply higher, driven by an escalation in Middle East geopolitical tensions and rising shipping security risks. Both the WTI and Brent front-month contracts posted gains of more than 3%, with prices hitting fresh multi‑session highs during the session.
I. Market Review
NYMEX December crude oil futures rose $3.80, up 3.82%, settling at $103.27 per barrel, with an intraday high of $103.92—its highest level since September 16—and posted a weekly gain of 4.29%. On the ICE, December Brent crude climbed $3.55, or 3.14%, to settle at $116.72 per barrel, with an intraday peak of $117.45—the highest since March 9—and recorded a weekly increase of 6.24%.
Refined product price differentiation: In December, heating oil rose 1.06%, closing at $4.7870 per gallon, up 1.35% on the week; December RBOB gasoline gained 1.27%, settling at $3.1284 per gallon, though it posted a slight weekly decline of 0.51%. Natural gas futures weakened, with November natural gas futures falling 5.58% to a settlement price of $2.640 per million British thermal units, and posting a steep weekly drop of 15.28%, in stark contrast to the strong performance of crude oil.
2. Trend Analysis
Core Bullish Factors: The ongoing spillover of the Middle East conflict, and the increased risk premium for shipping channels.
The core logic of this round of oil price increases is the market's reevaluation of the security risks to shipping and oil production facilities along the Persian Gulf and Red Sea, with geopolitical premiums once again becoming the main driver of pricing.
First, the conflict between the Houthi armed group and Saudi Arabia has escalated, with energy facilities becoming targets. The Houthi armed group launched four rounds of missile and drone attacks on Saudi Arabia within 48 hours, targeting the Ministry of Defense in Riyadh, airports, and oil facilities; the Saudi-led coalition successfully intercepted several ballistic missiles and drones. The market is concerned that the attacks could further spread to Saudi Arabia's core oil and gas production capacity. If major production and export facilities are damaged, it will directly impact global crude oil supply. Generally, institutions believe that sustained attack actions have amplified expectations of supply disruptions.
Second, frequent attacks in the Strait of Hormuz have put pressure on the safety of the shipping lane. Tracking data shows that in October, there was a significant increase in attacks on commercial vessels in the Strait of Hormuz and its surrounding waters. A Panamanian ultra-large oil tanker, the "Gem No.2," was attacked and caught fire in waters near the United Arab Emirates. The Strait of Hormuz handles a large volume of global crude oil shipments and is a critical energy "chokepoint." Frequent ship attacks have raised risk aversion among traders and shipowners, potentially leading to detours, increased insurance premiums, and reduced shipping capacity.
Third, an oil tanker spill in UAE waters has disrupted regional supply chains. On October 19, satellite imagery detected a major tanker leaking oil near Umm Al Quwain, prompting local authorities to temporarily close nearby beaches. The incident has not only caused short-term disruptions to maritime operations in the region but also underscores the ongoing rise in offshore shipping risks in the Persian Gulf, further heightening market concerns about the stability of regional tanker transport.
Hedging Against Negative Factors: Multiple Countries Release Strategic Reserves, and Russia–U.S. Diesel Trade Resumes, Alleviating Supply Concerns
While geopolitical benefits dominate the market, multiple supply hedging policies have been implemented in China, which to some extent curbs further oil price increases, forming a ceiling.
The U.S. Department of Energy has approved an emergency release of up to 400,000 barrels from the Strategic Petroleum Reserve to address a feedstock shortfall at the Phillips 66 refinery in Lake Charles, Louisiana. Notably, U.S. SPR inventories have now fallen to their lowest level since 1982, leaving limited room for further large-scale releases. This particular drawdown is primarily aimed at ensuring supply for regional refineries, with only a modest dampening effect on the global supply landscape.
Germany’s Federal Office of Economics and Export Control (BAFA) has launched a tender to sell crude oil, diesel, and heating oil from its strategic reserves. This marks Germany’s first release of reserve stocks since the G7 reached a corresponding agreement, signaling that Western nations are tapping their reserves to help stabilize energy prices. Meanwhile, Russian–U.S. diesel trade has begun to thaw, with the first tanker carrying 40,000 tons of Russian diesel already en route to the United States and expected to arrive on November 7. This shipment represents the first batch of Russian refined products to reach U.S. ports since Washington imposed an import ban on Russian petroleum products in 2022. In the short term, it should ease supply pressures on distillate fuels along the U.S. East Coast, putting downward pressure on heating oil and diesel prices—partly explaining why gasoline and heating oil price increases were notably more muted than those for crude oil on the same day.
3. Outlook for the Future Market
According to crude oil analysts, in the short term, the trading logic of oil prices will still focus on the evolution of the situation in the Middle East, which is a typical case of geopolitical risk-driven market conditions, characterized by high volatility and an increased likelihood of wide fluctuations. The risk premium has exacerbated investment risks in the market. If the geopolitical situation in the Middle East eases, there is a possibility of a rapid decline in oil prices. Additionally, with the continuous release of strategic reserves by various countries, including China, the upward space for oil prices will be constrained, making it easy for prices to rise and then fall back.
