Cinda Securities Co.,Ltd. has released a research report stating that current crude oil market price fluctuations are widening, presenting both structural opportunities and tail risks. Despite short-term oil price pressure, global crude oil inventories are at historically low levels, with OECD oil reserves at their lowest since 1990, and rigid replenishment demand from various countries will provide a solid floor for prices, limiting the significant downside risk for energy company earnings. Under the assumption that oil prices will likely remain in a wide range, with the firm estimating Brent crude's main trading band at $65-$85 per barrel, the high dividend yield of state-owned energy companies offers a guaranteed return.

Key Viewpoints from Cinda Securities:

Conflicts in the Middle East have restricted crude oil exports and production from the region, with stockpiling occurring within the Strait simultaneously with the rapid consumption of global inventories. The fragility of supply chains was highlighted when the Strait of Hormuz was blocked, disrupting approximately 16 million barrels per day of crude oil trade. Alternative pipelines, such as Saudi Arabia's east-west pipeline and the Abu Dhabi pipeline in the UAE, could handle about 5 million barrels per day of exports. Floating storage, the release of strategic reserves from the IEA, and increased U.S. exports filled a supply gap of approximately 5 million barrels per day. Considering the IEA and EIA's pre-blockade forecast of a 3 million barrels per day inventory build in 2026, and the drop in demand of 500,000 to 800,000 barrels per day due to the oil price surge following the blockade, the crude market essentially relied on a drawdown of 2.5 million barrels per day of other stocks, including commercial reserves. Total strategic and commercial reserve consumption was around 5-6 million barrels per day. Although recent fluctuations in the situation have allowed for the partial resumption of tanker traffic, the Strait's flow has again rapidly declined with renewed conflict, highlighting the fragility of supply and trade routes.

In the short to medium term, geopolitical situations may be subject to multiple reversals. Over the long term, five key factors will lead to a new market structure for crude oil after the conflict. The trajectory of the US-Israel-Iran conflict is currently volatile, but even in a post-war scenario, the full resumption of Strait operations faces constraints such as the time needed for mine clearance, the duration of voyages to and from export destinations, differing opinions on the order of compliance between warring parties, negotiations over Strait transit fees, and potential disruptions from Israel. A complete return to normalcy is unlikely in the short term. Under different scenarios, the recovery of Strait trade volumes in 2026 is likely to vary widely, ranging from 1 million to 10 million barrels per day. In the long term, the post-war crude oil market will enter a new phase, primarily driven by five factors: the rigid replenishment and expansionary stockpiling by oil-consuming nations, providing sustained demand support; Iran's ambition to exert long-term influence over Strait transit and gain economic benefits, creating a persistent geopolitical variable; the large divergence between OPEC+ production quotas and actual output, which could unleash a potential supply shock once geopolitical barriers are removed; the UAE's capacity expansion and policy shift, which significantly weakens OPEC+ marginal supply control; and the potential systemic adjustments to the global premium/discount system for conventional and sensitive oil. These five factors combined will subject the crude oil market to repair and consolidation, entering a new phase of more complex and intense volatility.

In the short to medium term, the crude oil market will focus on the path to ending the conflict. In the long term, oil prices face significant concerns due to the weakening of OPEC+'s marginal pricing power and the gap between quota growth and actual production decline. Short to medium-term oil price volatility depends on the actual degree of traffic resumption in the Strait. Under a scenario where negotiations break down, the crude oil market in 2026 could face a supply deficit of approximately 5.9 million barrels per day, corresponding to oil prices of $100-$120 per barrel, or even higher. Under a stalemate scenario, the market could face a deficit of about 3.1 million barrels per day, with prices ranging from $80-$100 per barrel. Under a limited reconciliation scenario, the market could see a surplus of about 1.7 million barrels per day, leading to significant downward pressure, with prices in a central range of $65-$80 per barrel. Under a full reconciliation scenario, the market could see a surplus of about 2.7 million barrels per day, with prices in a central range of $60-$70 per barrel. In the long term, the UAE's exit will weaken OPEC+'s marginal pricing power, Iran's supply variable will trend towards normalization, and the price system will change due to the restructuring of global trade. This will significantly increase uncertainty in the crude oil market, leading to more violent price swings. More importantly, the rapid recovery of OPEC+ production quotas in recent months, combined with the decline in actual output due to the conflict, has created a gap. If this gap is not addressed, it could pose a major risk to the crude oil market.

Risk Factors:

Geopolitical factors causing oil price volatility; risks from changes in macroeconomic conditions; risks from policy changes.