I recently noticed that crude oil trends are quite interesting, with WTI hovering above the $100 mark for several consecutive days. This actually reflects a deeper issue—the chain reaction of high oil prices is spreading.

Let's start with the most straightforward phenomenon. The economic data released by the U.S. last week was a bit alarming: April's CPI increased by 3.8% year-over-year, hitting a nearly one-year high. More importantly, the PPI surged from 4.3% in March to 6% annually, the fastest growth since 2022. What does this mean? It indicates that production costs are no longer limited to energy but are rising across the board.

I noticed a detail: energy and transportation costs are both climbing, and as a result, inflation in the service sector has also hit a four-year high. This is what’s called a "second-order effect"—oil price fluctuations not only impact oil itself but are transmitted layer by layer throughout the entire economy. The market is beginning to expect that the Federal Reserve will not only be unable to cut interest rates this year but also has about a 50% chance of raising rates again. What’s the result? U.S. Treasury yields have rebounded accordingly, with the 30-year Treasury yield reaching 5%. In the current environment, this has indeed triggered concerns about financial risks.

Even more concerning is the supply-side hidden risk. According to JPMorgan data, developed countries’ commercial crude oil inventories could approach operational limits as early as early June. In the Asia-Pacific region (excluding China), crude oil inventories have plummeted about 12% since February, reaching the lowest levels in a decade. If geopolitical tensions continue to stagnate, this inventory window might bottom out in June, at which point various buffering mechanisms could fail.

I personally believe the market’s reaction to these potential risks is still insufficient. Geopolitical negotiations might drag on for a long time, but the energy market doesn’t have that much time to wait. Once inventories truly run out, the volatility in oil prices could become extremely intense. From a technical perspective, WTI has already stayed above $100 for two consecutive trading days. If this trend continues, the next focus could be on $108 or even $115.

In simple terms, it’s now a pattern of “easy to rise, hard to fall.” The dates of May 26 and June 10 are particularly important to watch. If geopolitical progress remains stagnant, the risks of oil price fluctuations could further intensify.