International oil prices hit hard again: U.S. oil production hits a record high, and oil prices fall below $60 per barrel.

【Answer 1】 During his presidential campaign, Trump boldly claimed he would drive international oil prices below $60 per barrel—depriving Putin of the funds needed to sustain Russia’s invasion of Ukraine. On the fourth day after assuming office as U.S. president, Trump reiterated this point in a speech at the World Economic Forum in Davos, emphasizing that if oil prices fell to a certain critical threshold, the war in Ukraine would end. At the time, many—including possibly Putin himself—dismissed Trump’s remarks as wild talk, believing Trump had no real power to influence global oil prices. But this week, those skeptics are likely kicking themselves! Because: • London Brent crude prices have fallen below $65 per barrel! • U.S. WTI crude prices have dropped below $60 per barrel! • Russian Urals crude prices have plunged below $55 per barrel! I. Record U.S. oil production pushes WTI prices below $60 per barrel! According to a Fortune report dated April 7, U.S. crude benchmark WTI temporarily dipped below the psychologically significant $60-per-barrel threshold on Monday, April 7, driven by record U.S. oil output. This marks the first time in four years that front-month NYMEX WTI has fallen below $60—a level not seen since April 2021, when the pandemic was still raging. On Monday afternoon, WTI rebounded to settle at $60.70 per barrel. Last week, OPEC’s unexpected announcement of increased output further accelerated the global oil price decline. Energy analysts regard $60 per barrel as a critical threshold for U.S. producers: once prices dip below this level, drilling activity slows and output eventually contracts. In early April, WTI was still trading above $70 per barrel. Marshall Adkins, Raymond James’ Head of Energy, stated: “There’s no doubt that U.S. oil production will slow—and output will decline—once WTI falls below $60 per barrel. Of course, it won’t happen overnight. Perhaps we’ve just been hit over the head with a baseball bat. We’re just trying to get back on our feet and figure out what to do next. Oil production and pricing remain highly uncertain.” According to data from the U.S. Energy Information Administration (EIA), the United States is currently producing nearly 13.6 million barrels per day (bpd) of crude oil—about 1.2 times the roughly 11.3 million bpd produced in April 2021. Since the pandemic, the U.S. oil industry has largely oscillated between growth and stable maintenance—with no major setbacks so far. From a pricing perspective, the industry treats $60 per barrel as a key psychological threshold—but only a drop to $50 would constitute a true disaster for U.S. upstream operators. Rystad Energy estimates the average breakeven price for the U.S. oil industry at $52 per barrel. Prices above $65—or higher—trigger what’s colloquially known as “drill, baby, drill,” meaning meaningful increases in activity. Matthew Bernstein, Vice President of North American Oil & Gas at Rystad Energy, noted that since production growth outside the Permian Basin (in the Lower 48 states) is unlikely, persistently low prices will slow the production growth rate in the country’s most prolific basin—potentially dampening overall output growth in 2025.

Brent crude returns to $100: The traffic volume through the Strait of Hormuz—not geopolitical rhetoric—is the true driver of oil prices!

【Answer 2】 Tight inventories are directly reflected in refined product crack spreads. In late August, the U.S. diesel crack spread surged to approximately $103 per barrel—significantly stronger than gasoline cracks. In early September, the diesel crack spread for deliveries to Southern Europe briefly reached $104.08 per barrel, crossing the $100 threshold for the first time. Domestically, the diesel crack spread stood at 1,443.55 RMB/ton, while the gasoline crack spread was at 1,753.74 RMB/ton. The Governor of the Bank of England remarked that he now pays closer attention to the rapidly widening crack spreads than to crude oil prices overall. This signals that the market’s core contradiction has shifted—from “crude oil shortage” to “refined product shortage.” Refineries, incentivized by high margins, maintain elevated operating rates, thereby generating fresh demand for crude oil feedstock. Even if crude prices retreat due to weakening demand expectations, crack spreads and refinery margins may remain robust—providing ongoing support to crude oil prices. V. Supply Side: OPEC+ Has Hit Pause—but Quotas Are Now Meaningless On September 6, seven core OPEC+ producers convened and decided to hold October crude output targets steady at September levels—halting further increases. This marks the first time since the group launched its production hike in April that it has paused additional output growth. Under the announced quotas, Saudi Arabia is slated to produce 10.478 million bpd in October, Russia 9.949 million bpd, Iraq 4.431 million bpd, and Kuwait 2.676 million bpd—totaling roughly 31.01 million bpd. Yet these quotas carry little practical significance. With constrained passage through the Strait of Hormuz, even full compliance with quotas cannot translate into effective export volumes. Saudi Aramco’s published maximum sustainable capacity stands at ~12 million bpd; the IEA estimates ~12.11 million bpd. Yet Saudi Arabia’s actual supply in July was only about 8.24 million bpd. Fields have capacity—but export terminals and shipping infrastructure are bottlenecked. The IEA estimates that, under current conflict conditions and transport constraints, OPEC+’s readily deployable spare capacity amounts to only ~1.09 million bpd. The enormous gap between nominal capacity and effective spare capacity is now the defining feature of the supply side. U.S. shale oil: As of August 28, U.S. crude output stood at ~13.862 million bpd—up slightly from 13.843 million bpd the prior week. However, a Dallas Fed survey shows that even if WTI remains between $100–$150 per barrel, most firms expect U.S. crude output growth in 2027 to be limited to just 250,000–500,000 bpd. Shale’s short production cycle (6–8 months) enables rapid response to price changes—but rising service costs, depletion of premium well sites, and lengthening development timelines have markedly slowed the transmission of high prices into new output—compared to the previous high-price cycle. Russia: Due to sustained Ukrainian strikes on Russian oil export facilities, storage tanks, and refineries, refining capacity affected as of July reached 25%–30%, forcing Russia to increase crude exports while simultaneously cutting production. Some previously idled refineries have resumed operations, lifting utilization rates from 70% to 80%–85%, and crude exports have begun declining. Overall, the pace of global crude supply recovery is far slower than the market’s expectations of “long-term easing.” VI. Demand Side: China Shifts from “Reducing Purchases” to “Restocking”

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