CITIC Securities has released a research report stating that against the backdrop of persistently high oil prices and recurring geopolitical tensions, the firm recommends positioning around upstream resource endowments, cost control capabilities, and shareholder returns, while balancing earnings elasticity with operational stability. Key focuses include targets with strong oil and gas resource foundations and well-developed business layouts, targets with prominent refining-chemical integration advantages, targets with high upstream business proportions and potential for reserve and production growth, and targets benefiting from favorable conditions at overseas refineries. Taking into account the support that high oil prices provide to upstream earnings, opportunities for refining spread improvement, and shareholder returns from leading enterprises, the firm maintains its "Outperform" rating for the oil and petrochemical sector.
Core Views from CITIC Securities Are as Follows
No Substantive Progress in U.S.-Iran Talks, Hormuz Strait Shipping Still Obstructed
Divergences between the U.S. and Iran over issues such as lifting the blockade and restoring navigation have yet to be resolved, and there remains significant uncertainty regarding the full restoration of normal shipping through the strait. According to a report by Iranian state television on October 6 local time, an Iranian Defense Ministry spokesperson stated that Iran's domestic production capacity for specific weapons, equipment, and ammunition has been increased to 2.5 times the level before the U.S.-Israel-Iran conflict. According to Reuters, during the first week of October, tanker attacks in the Strait of Hormuz reached their highest level since the outbreak of the U.S.-Israel war against Iran in late February, with frequent attacks further exacerbating shipping security risks. According to Baltic Exchange data, as of October 7, the freight cost for a single Very Large Crude Carrier transporting U.S. crude to Asia had risen to $77 million, and cost pressures on crude oil trade continue.
Escalation in Yemen, Rising Risks to Energy Facilities and Bab el-Mandeb Strait
According to Xinhua News Agency, Houthi military spokesman Yahya Saree stated on social media on October 7 that over the past 24 hours, Saudi Arabia launched 156 airstrikes and missile attacks on six Yemeni provinces. Turki Al-Maliki, spokesman for the Saudi-led multinational coalition, also issued a statement on social media on the evening of October 7, saying the coalition launched a large-scale military operation against Houthi forces in Yemen, destroying 82 military targets. Military actions by both sides are showing an escalating trend. Considering that Saudi Arabia is a major global crude oil producer and exporter, further escalation of the conflict could affect oil fields, processing facilities, and export ports, while also impacting navigation through the Bab el-Mandeb Strait and increasing crude supply risks.
Crude Oil Prices Expected to Remain in High-Level Oscillation
According to Wind data, on October 7, Brent and WTI crude oil futures closed at $100.20 and $88.28 per barrel, respectively. Recurring U.S.-Iran tensions, the Saudi-Houthi conflict, and risks in the Strait of Hormuz and Bab el-Mandeb Strait continue to provide support for oil prices. We expect crude oil prices to remain in high-level oscillation around $100 per barrel for the remainder of 2026, with the pace of fluctuations mainly depending on negotiation progress and the degree of recovery in strait shipping, while also monitoring the possibility of a rapid decline in geopolitical risk premiums.
Refined Product Spreads Oscillating at High Levels
According to Wind data, on October 8, Singapore diesel cracking spreads reached as high as $73 per barrel, while gasoline cracking spreads rose to $40 per barrel. In September-October, U.S. diesel cracking spreads consistently remained above $100 per barrel, with gasoline cracking spreads rising to around $45 per barrel. The tight supply-demand pattern continues, and refined product spreads may strengthen further in the short term. At the current stage, with the U.S.-Iran conflict and Russia-Ukraine conflict ongoing, supply-demand imbalances in refined products are difficult to effectively alleviate in the short term, global inventories continue to decline, and supply tightness is expected to continue supporting spreads. As of September 30, 2026, according to EIA data, U.S. distillate inventories stood at 105 million barrels, down 13% compared to the past five-year average. According to Platts, although Singapore middle distillate inventories recovered to 8.84 million barrels, they remain approximately 9.8% lower than the same period last year at around 9.8 million barrels. With inventories not yet fully recovered and supply disruptions at overseas refineries continuing, we judge that refined product spreads still have strong support, and refining profitability is expected to improve further.
Diesel May Be the Most Elastic Product in This Round of Refined Product Spread Uptrend
According to Wind data, for the week of September 25, 2026, Singapore diesel, jet fuel, and gasoline cracking spreads were $55.5, $47.8, and $19.1 per barrel, respectively, expanding by $39.0, $30.7, and $14.5 per barrel compared to the January-February 2026 average, with diesel showing the most significant per-barrel spread expansion. Diesel demand covers industrial production, freight logistics, and agriculture, with rigid demand providing price support. In a tight supply-demand environment, marginal supply changes are more likely to amplify spread fluctuations, and diesel spread upside elasticity is expected to lead other refined product varieties.
Risk Factors
Macroeconomic growth slowdown; decline in crude oil and refined product demand; unexpected changes in Middle East geopolitical situation; higher-than-expected production increases by oil-producing countries and release of strategic reserves.