Oil prices are experiencing a "roller coaster" trend. What signals should A-share investors pay attention to?

In March, international oil prices became the market’s focus.

At the beginning of the month, NYMEX WTI crude oil futures hovered around $70 per barrel, but within just a few days, prices surged, briefly breaking the $100 mark, reaching a high of $119.48 per barrel; then the trend reversed sharply, falling back significantly. Brent crude oil followed suit, showing a pattern of sharp rise and fall. As of 11:04 Beijing time, on March 25, NYMEX WTI crude oil futures main contract fell 3.92%, to $88.73 per barrel; ICE Brent futures main contract fell 4.61%, to $95.61 per barrel.

Amid the rollercoaster of oil prices, what investment opportunities are there in the A-share market? What risks should be watched?

Q

What are the key reasons for the sharp fluctuations in oil prices?

The intense volatility in oil prices is primarily caused by geopolitical situations. Huatai Securities stated that since late February, Iran has implemented restrictions on shipping through the Strait of Hormuz, triggering a global oil and gas supply gap. Considering factors such as the disruption of Strait of Hormuz capacity, Saudi Arabia and UAE operating replacement pipelines at full capacity, potential North American production increases, and refinery preemptive reductions in net oil imports, calculations suggest that the global oil supply could face a shortfall of 2 million barrels per day in the short term. Meanwhile, ongoing blockade of the Strait of Hormuz has led to saturation of oil storage tanks in some Middle Eastern countries and caused oilfield shutdowns. Coupled with countries’ energy security considerations, which may trigger strategic reserves replenishment of crude oil and refined products, the mid-term oil price center is expected to further rise.

CICC believes that this geopolitical situation has a significant impact on the global oil supply, with increasing risks of shortages in the global spot market. Damage to Middle Eastern oil production capacity has also affected the long- and medium-term supply elasticity.

Chaos Tiancheng Futures indicates that the market is experiencing large fluctuations and unclear directions. Further developments depend on military actions or substantive progress in negotiations to determine whether the conflict will become prolonged or end in the short term.

Q

What is the future trend of oil prices? What should be monitored?

Caixin Futures states that the core driver of oil prices depends on the evolution of geopolitical situations. Internal scenario analysis shows three possibilities: if the conflict escalates, Iran continues to blockade the strait, and oil prices could surge above $120 per barrel; if both sides remain in confrontation, prices are likely to fluctuate within $85–$100 per barrel, which is the most probable scenario; if the conflict eases quickly and the Strait of Hormuz is fully open, the market will revert to the fundamentals of the commodity itself, with prices possibly falling back to around $80 per barrel.

Key variables to monitor include: real-time navigation data of the Strait of Hormuz, the actual impact of IEA’s strategic reserves release, and the restart progress of domestic and international refining and chemical facilities.

Q

In the rollercoaster of oil prices, what signals should A-share investors pay attention to? What should their investment strategies focus on?

GF Securities believes that the most concerning phase may have passed, but conditions for a full reversal are not yet mature. The A-share market is expected to enter a period of oscillation and bottoming out.

Investment should follow a “defense first” approach, focusing on three stabilizing signals: first, continuously tracking the evolution of geopolitical situations and the stabilization trend of international oil prices; second, observing changes in market volume and whether broad-based index ETFs show significant accumulation signals; third, paying attention to the operation of key indices.

In summary, the market is likely to fluctuate within the current range in the short term, digesting existing positions and waiting for clearer fundamental signals. Investors should remain patient, shifting from a broad rally mindset to deepening in specific sectors, actively seizing structural investment opportunities while strictly managing overall risks.

Regarding investment strategies, CITIC Securities suggests prioritizing the deployment of overseas capacity rebuilding industries with high costs and difficulty, and supply flexibility sensitive to policy changes, such as new energy, chemicals, electrical equipment, and non-ferrous metals. Additionally, further increasing allocations to low-valuation factors, with a focus on insurance, brokerage, and power sectors.

Furthermore, four specific opportunities related to the following clues can be prioritized:

1. Due to oil price shocks, chemical products with alternative raw materials and process routes will benefit from high price spreads.

2. Commodities with higher production shares in the Middle East and Western Europe may see supply disruptions leading to additional supply-demand gaps and price increase expectations.

3. Substitutes driven by cost increases that boost demand, further widening supply-demand gaps.

4. Commodities already in an upward price channel, with rising costs providing a favorable window for price increases amid balanced supply and demand.

Q

What risks should be monitored?

Huatai Securities states that in the short term, the risk transmission chain of “high oil prices—global stagflation—liquidity tightening” requires close attention, and tail risks should not be overlooked. From a capital perspective, the expansion of insurance funds’ allocations provides ongoing support.

Huaxin Securities emphasizes the need to focus on disruptions caused by overseas geopolitical conflicts. As the geopolitical situation continues to escalate abroad, the negative feedback effects following sharp oil price increases are gradually emerging. Concerns about stagflation and liquidity tightening persist, putting continued pressure on risk assets, with gold potentially experiencing profit-taking-driven declines.