Looking at the actual output from OPEC, the strong production expectations have been fulfilled. What is worth noting is that the expansion of production capacity from non-OPEC+ countries has further exacerbated the oversupply. The performance on the demand side has been even weaker, acting as another “invisible hand” to suppress oil prices.

The current global crude oil supply and demand structure is experiencing a deep adjustment, with the contradiction between loose supply and weak demand becoming increasingly apparent. At the same time, the warming of Sino-US economic and trade frictions has led to an increase in safe-haven demand and a weakening of risk assets. The recent continuous cooling in the Middle East has further strengthened the bearish trend of oil prices.

Against the backdrop of multiple bearish factors resonating, domestic and foreign crude oil futures prices showed a one-sided downward trend last week. Among them, the price of the domestic crude oil futures main contract fell to a low of 433 yuan per barrel, with a cumulative decline of 6.23% that week, and the futures price showed a pattern of easy decline and difficult recovery.

From the supply side, the pressure of production increase at the international level is the core factor driving the decline of oil prices in this round. Data show that OPEC+ has gradually abandoned the production reduction strategy since April 2025, and turned to a competitive strategy of "producing more to maintain market share". At the beginning of October, OPEC+ decided to continue increasing production by 137,000 barrels per day in November, which is equal to the increase in October, and this move was seen as an attempt to seek a larger market share. Although at the beginning of this month, OPEC+ increased its production capacity by less than the previous market expectation of 500,000 barrels per day, and significantly weaker than the 548,000 barrels per day in August and September, the trend of production increase has not been reversed. This means that since the end of September, OPEC+ has been steadily advancing the second stage of the production increase plan, and the daily new supply in the fourth quarter is expected to exceed 4.3 million barrels.

Looking at the actual output of OPEC, the strong production expectations have been fulfilled. Meanwhile, major oil producers such as Saudi Arabia and Iraq maintain high-level exports, with Saudi Arabia's crude oil exports stable at 9 million barrels per day and Iraq also remaining at the 4 million barrels per day level, ensuring a sufficient supply in the Middle East region.

What is worth noting is that the expansion of production capacity in non-OPEC+ countries has further exacerbated the oversupply of supply. The production of oil countries in South America, represented by Brazil and Guyana, continues to rise, and the US shale oil has shown amazing resilience. As of the week of October 10, 2025, the daily crude oil production in the United States is 13.636 million barrels, with a slight increase of 0.7 million barrels per day compared to the previous week, and a significant increase of 13.6 million barrels per day compared to the same period last year, approaching the historical peak. Although institutions such as Goldman Sachs predict that the average price of crude oil in 2025 may only be $63 per barrel, which poses pressure on shale oil profits, the current production has not shown a significant contraction, but has maintained growth under technological progress and cost optimization, forming an abnormal situation of "low price and high production". In addition, although the geopolitical conflict continues - the Russia-Ukraine conflict is unresolved, and Iran faces the risk of upgraded sanctions - its support for oil prices has significantly weakened. Market concerns about supply disruptions are offset by the continuous release of production capacity, and the geopolitical premium is gradually fading, with crude oil returning more to fundamental pricing.

The performance of the demand side has been more sluggish, becoming another "invisible hand" to suppress oil prices. With the end of the summer travel peak in the northern hemisphere, global refineries have entered a seasonal maintenance cycle, and the demand for industrial and transportation fuels has clearly declined. According to statistics, as of the week ending October 10, 2025, the US refinery utilization rate plummeted to 85.7%, a weekly decrease of 6.7 percentage points, a significant decrease of 7.6 percentage points compared to the previous month, and a slight decrease of 2.0 percentage points compared to the same period last year. The Asian market is also not optimistic, as of the week ending October 17, 2025, the operating rate of China's main refining enterprises dropped to 73.48%, and Shandong's independent refining enterprises maintained a low level of 54.95%. This not only suppresses the demand for crude oil processing but also leads to an increase in refined oil inventory pressure. Driven by the seasonal weakness in demand, the recent US commercial crude oil inventory has ended the drawdown and entered the accumulation stage. According to statistics, as of the week ending October 10, 2025, the US commercial crude oil inventory (excluding the strategic petroleum reserve) reached 424 million barrels, a significant increase of 3.524 million barrels compared to the previous week, and a slight increase of 3.235 million barrels compared to the same period last year.

Against this backdrop, the pricing logic for domestic crude oil futures has also undergone significant changes. The "cost plus premium" model, which relied on geopolitical risk premiums and OPEC+ production cuts in the past, is gradually shifting towards a fundamentals-driven pricing model based on "supply and demand plus inventory". The price correlation between domestic crude oil futures and WTI, Brent has further increased. Meanwhile, the profit margin for domestic refineries has narrowed, and the enthusiasm for processing has not been high, leading to a decrease in the willingness to take delivery of high-cost crude oil, which further suppressed the rebound momentum of the domestic futures price.

To sum up, the recent weakness in domestic crude oil futures is an inevitable result of the global supply and demand structure being reshaped. The "big increase" in supply and the "slow recovery" in demand form a stark contrast, and the marginal impact of geopolitical risks has weakened, with the market returning to being dominated by fundamentals. Without major unexpected events intervening, based on the consideration of oversupply in the oil market, it is expected that domestic and foreign crude oil futures prices may continue to follow a pattern of easy decline and difficult rise, focusing on the dynamic evolution of the three major variables of inventory, policy, and geopolitics.

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