According to the Securities Times APP, the tension in the Middle East has escalated again, leading to abnormal international oil prices. As of 6 a.m. today, WTI crude oil and Brent crude oil futures prices have both surged above $70 and $75 per barrel, with gains exceeding 2%, of which WTI crude oil has risen by over 3%. The fluctuation in the crude oil market is also related to the news of the extension of the OPEC+ production cuts, with reports that OPEC+ has agreed to delay the planned oil production increase from December by one month. Analysts point out thattechnical indicatorsthe consistency and OPEC+ delaying supply increases indicate a bullish short-term outlook for crude oil. However, due to geopolitical tensions, the outcome of the US presidential election, and the US Federal Reserve's interest rate decisions, potential volatility remains high. Crude oil prices may further rise, but cautious sentiment may persist to address any escalation in geopolitical risks in the Middle East.

According to the latest news, some media sources have reported that Iran may retaliate against Israel with more powerful projectiles than the last attack, as previous Israeli attacks on Iran resulted in the deaths of four soldiers and one civilian. In addition, this retaliation will involve the Iranian Armed Forces, and the Islamic Revolutionary Guard Corps of Iran will no longer act alone.

As the situation between Iran and Israel escalates again, it has raised concerns in the market.

US B-52 strategic bombers have already arrived in the Middle East, and the US Central Command has confirmed this news through social media. At the same time, the US officials have issued a warning to Iran, stating that if Iran continues to launch attacks on Israel, the US will not be able to control Israel's response. Iran, in turn, strongly responded to the US warning. There are even reports that Iran is planning to respond to Israel using more powerful projectiles.

The series of military movements mentioned above have intensified the tense atmosphere in the region, further boosting oil prices.

In addition, the Organization of the Petroleum Exporting Countries (OPEC) stated on the 3rd that 8 OPEC and non-OPEC oil-producing countries have decided to extend the voluntary production cut measures of 2.2 million barrels per day originally set to expire by the end of November until the end of December. The statement mentioned that Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, the 8 "OPEC+" member countries, have decided to extend the voluntary production cut measures. The statement did not mention whether these 8 countries would begin to withdraw this portion of the production cut in January next year.

The statement pointed out that the 8 countries reaffirmed their determination to fully comply with the voluntary production cut targets, and countries that have exceeded their quotas since the beginning of this year will fulfill compensatory reduction obligations by September 2025.

The above-mentioned 8 countries initially announced the voluntary production cut measures of 2.2 million barrels per day in November 2023. In early June this year, the 8 countries announced the extension of this part of the voluntary production cut measures until the end of September, and decided in early September to extend it again until the end of November.

Kieran Tompkins, a macro analyst at Kuitu, said in a report that OPEC+ will postpone the production cut by one month, which will have a slight impact on oil supply in 2025, but OPEC is at a crossroads on how to proceed in the coming months and years as it tries to keep prices rising and regain lost market share. Tompkins said that in the long run, considering that OPEC+ unintentionally handed over market share to other countries and is looking to extract oil while demand is still rising, this procrastination seems unsustainable. This increases the possibility of greater changes in oil policies, causing a significant supply shock to the market.

From the perspective of OPEC+ policies, it is highly likely that OPEC+ will enter a slow production increase cycle in 2025. Currently, OPEC+ is in a transitional phase before entering the production increase cycle. OPEC+ may continue to implement the previous oil price support policy through "major countries continuing to extend voluntary production cuts and member countries that previously exceeded production reducing subsequent quotas". Substantial production increases may still await the global economy bottoming out. The entry of OPEC+ into a production increase cycle is only a matter of time, with a high probability of entering such a cycle in 2025, and the process of the production increase cycle may resemble the slow, dynamically adjusted monthly small-scale production increases seen after the global economic impact of the 2020 COVID-19 pandemic.

Regarding U.S. crude oil production, under the current capital expenditure scale, shale oil may find it difficult to further increase production. On one hand, the number of wells that can be developed under the current capital expenditure continues to decline, and increasing capital expenditure still requires stimulation from high oil prices; on the other hand, the scale of inventory wells is continuously being depleted, with the current number reaching a new low since 2014, limiting further production capacity. At the same time, the number of completions has been consistently higher than the number of newly initiated wells in recent periods, and the increase in 2023 is mainly dependent on improving production efficiency in certain producing areas, where further growth in production efficiency is already difficult. The EIA predicts that the scale of U.S. crude oil production in 2024-2025 may range from 13.5-14 million barrels per day.

Citic Securities believes that the global supply and demand structure for crude oil is expected to gradually shift from a tight balance in 2024 to a loose balance in 2025. Until the overseas economy bottoms out and recovers, the commodity nature slightly suppresses the trend of oil prices. The overall situation may still present a weak and fluctuating market in 2025. It is highly likely that OPEC+ will slowly enter a production increase cycle in 2025, with greater difficulty in further increasing U.S. shale oil production, with output expected to be around 13.5-14 million barrels per day. In addition, the conflict in the Middle East has not ended, and it is expected to mainly affect oil prices in pulses, with the basic ban on Iranian crude oil shipments not significantly affecting oil price trends. Considering a comprehensive analysis of commodity and financial attributes, the international oil price central point from the fourth quarter to the end of the year is likely to hover around $75 per barrel.

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