US crude oil is expected to break through the volatility! The five-wave structure has an explanation
2025-09-15 21:56:13
During Monday's European and American trading hours, the October crude oil futures contract rose 0.99% to trade around 63.31. Oil prices remained volatile, supported by the moving average and the lower edge of the price range. The market is currently mired in uncertainty surrounding the US-Russia sanctions standoff and crude oil oversupply. However, rising expectations of a Federal Reserve rate cut (a 75 basis point cut is expected this year) have significantly boosted risk appetite, leading to record highs for stock market indices. Despite pressure from the moving average and concerns about overproduction, crude oil prices remained within the lower edge of the price range, maintaining their upward trend.
In a report released on Monday, HSBC pointed out that it expects the crude oil market to see a significant surplus of 1.7 million barrels per day (mbd) in the fourth quarter of 2025, and the surplus will expand to 2.4 million barrels per day in 2026; the recovery of OPEC+ crude oil production in the next 12 months will further aggravate this supply and demand imbalance.
At a meeting held this month, OPEC+ decided to further increase crude oil production by 137,000 barrels per day in October, starting the process of early lifting the previous production cut of 1.65 million barrels per day.
HSBC said a week ago that its latest crude oil market supply and demand model showed that OPEC+ will gradually lift the 1.65 million barrels per day production cut in the "first phase" voluntary production cut plan within 12 months.
The bank also warned that if crude oil inventories in Western markets actually increase, its price assumption of $65 per barrel for Brent crude in 2026 will face downside risks.
At the same time, the US has demanded that the G7 and NATO impose tariffs of 50%-100% on China, citing its purchase of Russian oil as a pretext. In response, China's Ministry of Commerce stated that China consistently opposes economic and trade restrictions against China under the pretext of so-called "Russia-related" issues. The US's attempt to coerce relevant parties by imposing "secondary tariffs" on China under the pretext of purchasing Russian oil is a classic example of unilateral bullying and economic coercion. It seriously violates the consensus reached during the call between the Chinese and US presidents and could have a severe impact on global trade and the stability of production and supply chains. China firmly opposes this. If any party harms China's interests, China will take all necessary measures to safeguard its legitimate rights and interests.
HSBC clarified in a report on Monday that "[HSBC's] baseline scenario does not include an outright reduction in Russian crude oil supply, but Russia will struggle to increase production within its OPEC+ quota." The bank now expects only a small increase in Russian crude oil production and has lowered its forecast for Russian crude oil production by 300,000 barrels per day by the end of 2026.
The Federal Open Market Committee (FOMC) interest rate decision will be held on Wednesday: the market has fully priced in the expectation of a "25 basis point rate cut", which continues to push up risk appetite and provide effective support for commodities.
Russia was attacked by a drone: Ukraine launched a precision strike on two core Russian refineries, further exacerbating concerns about global crude oil supply and helping oil prices to stand firmly above the support level of $61.
The latest round of supply disruptions stemmed from drone attacks targeting two key Russian refineries—the Primorsk Terminal and the Kirishneft Ogorsintez refinery—further solidifying support for oil prices at $61. While bullish sentiment persists, a clear upward trend has yet to be confirmed on the charts. Demand concerns and trade uncertainty continue to weigh on market sentiment, particularly the Organization of the Petroleum Exporting Countries' (OPEC) recent easing of production cuts, a stark reflection of slowing demand growth.
OPEC's current easing of production cuts is limited to 137,000 barrels per day (bpd), a cautious move interpreted as a foresight toward a potential second phase of easing production cuts. However, the current crude oil price remains significantly offset from OPEC member countries' revenue targets, a discrepancy that reinforces market expectations that OPEC is actively calibrating its market share strategy, positioning itself for a potential long-term bullish cycle.
This week's market volatility will be primarily driven by the FOMC meeting—the baseline expectation is a 25 basis point rate cut, but given the continued deterioration of the U.S. labor market, an extreme scenario of an unexpected 50 basis point rate cut cannot be ruled out. The probability of a 25 basis point rate cut this week is over 90%, and the probability of another 25 basis point rate cut next month is over 70%.
Meanwhile, the US dollar index remains above its 2025 low of 96.50, while US stock indices continue to climb to record highs. Although safe-haven demand triggered by the Russia-Ukraine conflict and escalating tensions in the Middle East has supported the dollar, the outcome of the FOMC meeting is likely to disrupt the current bull-bear balance, sending the dollar further searching for a bottom.
In the current market environment, crude oil prices are expected to continue to benefit from the following core logic: the continued fermentation of geopolitical risks, the risk of supply-side disruptions caused by sanctions, and the expectation of the Federal Reserve's loose policy supporting the overall risk-oriented tone of the global market.
Since the oil price peak in June 2025 (triggered by the Israel-Iran conflict), the October crude oil futures contract has been trading within a triangle consolidation pattern. The price trend has exhibited the typical consolidation characteristics of "lower highs and higher lows," and has never fallen below the key support level of $61.
Given the five-wave structure already formed within the triangle, if oil prices can hold above $64, coupled with a surprise rate cut from the Federal Reserve, a bullish breakout is likely to occur, opening up upside potential to the following targets: $66.80, $67.70, and $70.20. These targets coincide with the upper resistance level of the long-term descending channel since 2022. However, traders should be wary of false breakouts to prevent buying expectations and selling reality.
If oil prices effectively break through $70.20, it will most likely reverse the long-term trend and switch from the "consolidation and shock" stage to the "potential bullish reversal" stage.
If oil prices fail to effectively hold the $61 support level due to OPECOPEC+ increasing crude oil supply as scheduled, they will face pressure to retest the 2025 low. The key support levels are $60.20, $59.20 and $58.00 respectively.
(Daily chart of the October crude oil futures contract, source: Yihuitong)
At 21:48 Beijing time, the October futures contract of US crude oil is currently trading at 63.23/22.
Market Information
In a report released on Monday, HSBC pointed out that it expects the crude oil market to see a significant surplus of 1.7 million barrels per day (mbd) in the fourth quarter of 2025, and the surplus will expand to 2.4 million barrels per day in 2026; the recovery of OPEC+ crude oil production in the next 12 months will further aggravate this supply and demand imbalance.
At a meeting held this month, OPEC+ decided to further increase crude oil production by 137,000 barrels per day in October, starting the process of early lifting the previous production cut of 1.65 million barrels per day.
HSBC said a week ago that its latest crude oil market supply and demand model showed that OPEC+ will gradually lift the 1.65 million barrels per day production cut in the "first phase" voluntary production cut plan within 12 months.
The bank also warned that if crude oil inventories in Western markets actually increase, its price assumption of $65 per barrel for Brent crude in 2026 will face downside risks.
At the same time, the US has demanded that the G7 and NATO impose tariffs of 50%-100% on China, citing its purchase of Russian oil as a pretext. In response, China's Ministry of Commerce stated that China consistently opposes economic and trade restrictions against China under the pretext of so-called "Russia-related" issues. The US's attempt to coerce relevant parties by imposing "secondary tariffs" on China under the pretext of purchasing Russian oil is a classic example of unilateral bullying and economic coercion. It seriously violates the consensus reached during the call between the Chinese and US presidents and could have a severe impact on global trade and the stability of production and supply chains. China firmly opposes this. If any party harms China's interests, China will take all necessary measures to safeguard its legitimate rights and interests.
HSBC clarified in a report on Monday that "[HSBC's] baseline scenario does not include an outright reduction in Russian crude oil supply, but Russia will struggle to increase production within its OPEC+ quota." The bank now expects only a small increase in Russian crude oil production and has lowered its forecast for Russian crude oil production by 300,000 barrels per day by the end of 2026.
The Federal Open Market Committee (FOMC) interest rate decision will be held on Wednesday: the market has fully priced in the expectation of a "25 basis point rate cut", which continues to push up risk appetite and provide effective support for commodities.
Russia was attacked by a drone: Ukraine launched a precision strike on two core Russian refineries, further exacerbating concerns about global crude oil supply and helping oil prices to stand firmly above the support level of $61.
The latest round of supply disruptions stemmed from drone attacks targeting two key Russian refineries—the Primorsk Terminal and the Kirishneft Ogorsintez refinery—further solidifying support for oil prices at $61. While bullish sentiment persists, a clear upward trend has yet to be confirmed on the charts. Demand concerns and trade uncertainty continue to weigh on market sentiment, particularly the Organization of the Petroleum Exporting Countries' (OPEC) recent easing of production cuts, a stark reflection of slowing demand growth.
OPEC's current easing of production cuts is limited to 137,000 barrels per day (bpd), a cautious move interpreted as a foresight toward a potential second phase of easing production cuts. However, the current crude oil price remains significantly offset from OPEC member countries' revenue targets, a discrepancy that reinforces market expectations that OPEC is actively calibrating its market share strategy, positioning itself for a potential long-term bullish cycle.
Subsequent volatility focus: Pricing logic of FOMC meetings and interest rate decisions
This week's market volatility will be primarily driven by the FOMC meeting—the baseline expectation is a 25 basis point rate cut, but given the continued deterioration of the U.S. labor market, an extreme scenario of an unexpected 50 basis point rate cut cannot be ruled out. The probability of a 25 basis point rate cut this week is over 90%, and the probability of another 25 basis point rate cut next month is over 70%.
Meanwhile, the US dollar index remains above its 2025 low of 96.50, while US stock indices continue to climb to record highs. Although safe-haven demand triggered by the Russia-Ukraine conflict and escalating tensions in the Middle East has supported the dollar, the outcome of the FOMC meeting is likely to disrupt the current bull-bear balance, sending the dollar further searching for a bottom.
In the current market environment, crude oil prices are expected to continue to benefit from the following core logic: the continued fermentation of geopolitical risks, the risk of supply-side disruptions caused by sanctions, and the expectation of the Federal Reserve's loose policy supporting the overall risk-oriented tone of the global market.
Crude Oil Weekly Outlook: Daily Chart – Logarithmic Scale
Since the oil price peak in June 2025 (triggered by the Israel-Iran conflict), the October crude oil futures contract has been trading within a triangle consolidation pattern. The price trend has exhibited the typical consolidation characteristics of "lower highs and higher lows," and has never fallen below the key support level of $61.
Given the five-wave structure already formed within the triangle, if oil prices can hold above $64, coupled with a surprise rate cut from the Federal Reserve, a bullish breakout is likely to occur, opening up upside potential to the following targets: $66.80, $67.70, and $70.20. These targets coincide with the upper resistance level of the long-term descending channel since 2022. However, traders should be wary of false breakouts to prevent buying expectations and selling reality.
If oil prices effectively break through $70.20, it will most likely reverse the long-term trend and switch from the "consolidation and shock" stage to the "potential bullish reversal" stage.
If oil prices fail to effectively hold the $61 support level due to OPECOPEC+ increasing crude oil supply as scheduled, they will face pressure to retest the 2025 low. The key support levels are $60.20, $59.20 and $58.00 respectively.
(Daily chart of the October crude oil futures contract, source: Yihuitong)
At 21:48 Beijing time, the October futures contract of US crude oil is currently trading at 63.23/22.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
