The world is waiting for "the next story"

Why is the oil price fluctuation mainly driven by news events in the market?

Source: Wall Street Intelligence Circle

Oil prices have “fallen,” but global markets are still uneasy.

First, the sudden reversal in oil prices is not primarily due to supply and demand changes but because the worst-case scenario (full-scale energy war) is temporarily unlikely. Trump said he wouldn’t send ground troops, and Netanyahu also indicated he wouldn’t continue attacking energy facilities. But this is just “emotional recovery,” not a “problem resolution.” The energy system has already been damaged—Qatar’s largest LNG plant is affected (repair will take years), and the Strait of Hormuz is nearly closed. Therefore, Brent crude remains above $100.

Second, currently, U.S. crude oil and Brent crude are diverging:

· Brent (global oil): Represents Middle East/global supply, directly impacted by war, and is nearing uncontrollable levels.

· U.S. crude: Heavily influenced by U.S. policies and being “artificially suppressed.”

When this happens, either global prices align with U.S. prices (war de-escalation), or U.S. prices are forced to “catch up” (policy failure). Right now, the more likely scenario is the second.

Third, Wall Street analysts generally believe that “volatility will increase further.” Because prices are no longer determined solely by supply and demand but by “the next news.” One piece of news can cause oil prices to fall, while the next can cause a sharp rise, making it impossible for the market to establish stable expectations.

Oil prices have now entered an “asymmetric phase”:

· Upside potential: Significant. Saudi Arabia expects that if energy shocks persist beyond April, oil prices could surge to $180.

· Downside potential: Limited, as supply has already been damaged.

A “de-escalation” news event can cause a 5% drop; an “escalation” event can push prices up by 10%.

All the actions you see—reserves release, Iranian oil release, export restrictions—are policies “counteracting the market”—Trump is suppressing oil prices, not the market naturally declining. Once these policies fail, prices could quickly spiral out of control.