On March 9, Brent crude and WTI crude both surged by approximately 30% at one point, approaching the $120 per barrel mark, marking a gain of over 60% within seven trading days. In the afternoon, international oil prices retreated rapidly, with intraday fluctuations exceeding 20%. As of 14:00 Beijing time, Brent crude futures fell below $107 per barrel, narrowing its daily gain to 14.67%. WTI crude futures dropped below $104 per barrel, with its daily increase moderating to 13.44%. Reports indicate that the G7 will discuss a coordinated release of emergency petroleum reserves.
The sharp rise in oil prices during the morning session impacted global stock markets. Japanese and South Korean stock indices both fell by over 7%, while U.S. stock index futures also declined significantly. Subsequently, these losses have partially receded. The Nikkei 225 index narrowed its decline to around 5%, the Korea Composite Index fell by approximately 6%, and futures for the S&P 500, Dow Jones Industrial Average, and Nasdaq 100 all declined by more than 1.5%.
Gains in the oil and gas sectors in A-shares and Hong Kong stocks also moderated. In A-shares, CNOOC briefly hit the daily limit-up but its gain has narrowed to around 6%. In Hong Kong, Shandong Molong rose 28% to HK$10.63, after reaching a high of HK$16.33 in the morning session, nearly doubling. BQ Energy Services gained 30%, and Sinopec Oilfield Service rose 5%.
Gold and silver began to rebound. As of around 14:20 Beijing time, the intraday loss for spot gold narrowed to 0.85%, climbing back above $5120 per ounce. Spot silver turned from loss to gain, fluctuating near $84 per ounce.
Behind the rapid surge in oil prices above $110 per barrel in the morning session, production from more major Middle Eastern oil producers is constrained, and the Strait of Hormuz remains almost completely closed. Since the airstrikes by the U.S. and Israel on Iran over a week ago, tensions in the Middle East show no signs of cooling. This narrow waterway carries one-fifth of the world's oil shipments. Disruptions to shipping and attacks on energy infrastructure have driven up prices for crude oil and natural gas.
With tanker traffic nearly halted, significant volumes of crude oil are accumulating in the Middle East, unable to be transported. As storage capacity gradually becomes exhausted, Gulf oil producers are being forced to cut output.
JPMorgan stated that if the Strait of Hormuz remains impassable, global oil production cuts could rise to 3.3 million barrels per day by the 8th day, 3.8 million barrels per day by the 15th day, and 4.7 million barrels per day by the 18th day. Governments, particularly in Asia, are already taking action to protect domestic fuel supplies.
The scale of the supply shock is unprecedented, currently estimated at 17 times the peak impact on Russian production in April 2022. The resulting potential rate of inventory depletion could cause the market to begin pricing in demand destruction more rapidly. Furthermore, consumer stockpiling and potential cuts in refined petroleum product exports from non-OECD countries may further accelerate the drawdown of OECD oil inventories.
The key factor for the future is the duration of the tensions in the Middle East. The International Energy Agency has indicated it is prepared to coordinate a global release of strategic reserves if the disruptions persist, and it is monitoring whether the closure of the Strait of Hormuz becomes prolonged.
The U.S. has temporarily eased sanctions on Russian oil cargoes destined for India shipped before April 4. Russian Urals crude arriving in India from March to early April is now trading at a premium of $4-$5 per barrel to Brent on a delivered basis, reversing a discount of $13 per barrel seen in February. The U.S. is evaluating a range of options to address the potential energy crisis, including waiving biofuel blending mandates, providing insurance guarantees, and naval escorts.
Natasha Kaneva, Chief Commodities Strategist at JPMorgan, noted that while a series of reassurances from the U.S. government may help reduce some of the risk premium in the oil market, these assurances alone are unlikely to restore tanker traffic through the Strait, as the preconditions for commercial confidence are not yet fully established.
Goldman Sachs estimates that oil flow through the Strait of Hormuz has decreased by 18 million barrels per day, with current flows roughly equivalent to about 10% of normal levels, lower than its earlier assumption of 15%. Risks around its base case scenario have further shifted towards the possibility of shipping flows remaining at lower levels for a longer period.
Vikas Dwivedi, Global Energy Strategist at Macquarie, stated that if the Strait of Hormuz were to close for several weeks, it could trigger a chain reaction potentially pushing crude oil prices to $150 per barrel or higher.
Looking ahead, Goldman Sachs pointed out that a reduction in physical shipping risks is likely a necessary condition for a significant recovery in shipping flows through the Strait of Hormuz. It identified three potential paths: a general de-escalation of the conflict; strong protection for tankers provided by the U.S.; or Iran allowing safe passage for tankers from/to specific origins/destinations.