Crude Oil Hits Upper Limit Again, Beware of High-Level Risks

After the energy and chemical sector surged last Friday night, most energy products hit their daily limit-up at the market open this Monday. Crude oil main contracts rose by 17%, and following the domestic crude oil limit-up, WTI and Brent crude oil continued to surge on the international markets. As of press time, both WTI and Brent crude oil have broken through the $115 per barrel level. Given Iran’s control of the Strait of Hormuz, a critical shipping passage, even if geopolitical tensions ease, restoring shipping and resuming oil field production in Middle Eastern Gulf countries will still be challenging. With tensions escalating over the weekend, there may be additional risk premiums injected into oil prices.

Specifically, the current driving factors behind oil prices are the duration of the Strait of Hormuz blockade and the ongoing conflict, as well as the extent of damage to Middle Eastern oil facilities. These two factors are currently influencing each other. As we enter the second week of pricing, overall oil price volatility is expected to further increase. During this period, oil prices will be particularly sensitive to news, leading to higher volatility. Different timeframes will lead to different considerations for oil prices.

Extreme sentiment may result from escalating conflict intensity, continued damage to Middle Eastern oil facilities, ongoing Strait of Hormuz blockade, and increased production cuts by oil-producing countries, potentially pushing oil prices higher or even breaking through previous highs. Caution is advised regarding the risk of significant oil price fluctuations. (Everbright Futures)