Oil Prices Rise Significantly This Week, Multiple Factors Drive Rebound
This week, the oil market showed strong performance, with WTI crude oil rising nearly 6% over the week, SC crude gaining over 5%, and Brent crude oil recording a 4.5% increase, while European diesel surged over 7%. Crude oil emerged as the most robust commodity over the past week, especially in the context of a general decline in commodities like gold, silver, and copper, and a weak overall trend in the commodity markets, making the strong rebound in oil prices particularly noteworthy.
The main factors driving the rebound in oil prices include escalating geopolitical risks, a significant decline in inventories, and a shift in market trading logic towards positive aspects. Although the pressure of oversupply in 2025 remains a significant concern for the market, in the short term, these favorable factors have clearly dominated market sentiment.
Geopolitical Tensions Elevate Risk Premiums
The escalation of geopolitical tensions in the Middle East is one of the key factors supporting oil prices. Israel has recently hinted at the possibility of attacking Iranian nuclear facilities, and US President-elect Trump has also indicated the potential for future conflict with Iran. These developments, combined with the instability of the Syrian regime, have heightened market concerns about risks in the Middle East, providing premium support for oil prices.
Unexpected Inventory Decline, WTI Particularly Strong
In Oklahoma's Cushing, crude oil inventories fell by 1.298 million barrels this week, reaching the lowest level in nearly five years, far exceeding market expectations. Against this backdrop of low inventories, WTI crude prices have significantly outperformed oil prices in other regions. This phenomenon reflects market concerns about supply reaching a trough, further pushing up oil prices.
Additionally, the latest data from the U.S. Energy Information Administration (EIA) shows that although U.S. crude oil production has continued to climb to a record high of 13.631 million barrels per day, the recent rebound in refined product crack spreads has also provided some support to the market. Specifically, strong diesel demand in the European market has driven crack spreads significantly higher.
Slowing Demand Growth, Institutions Lower Long-Term Forecasts
Although short-term positives have driven the oil price rebound, monthly reports recently released by three major authoritative institutions hold a relatively pessimistic outlook on demand growth in the oil market. The International Energy Agency (IEA), OPEC, and the U.S. Energy Information Administration (EIA) have all lowered their forecasts for global oil demand growth in 2024. OPEC projects a global oil demand increase of only 1.61 million barrels per day in 2024, while the IEA has lowered this increase to 840,000 barrels per day.
However, the IEA has raised its 2025 demand growth forecast to 1.1 million barrels per day, mainly due to potential demand increases driven by stimulus policies in Asian countries, especially China. Nonetheless, considering the rising substitution rate of new energy sources and changes in transportation fuel demand, there remains significant uncertainty about whether this forecast can be realized.
Technical and Market Sentiments Support Short-Term Rebound
From a technical perspective, the weekly chart of oil prices shows an N-shaped structure, where stabilization in key support areas usually indicates a higher likelihood of an enhanced rebound. Furthermore, oil prices reached new highs in December over the past week, and in the short term, they are likely to further challenge the resistance formed during the U.S. presidential election in November. However, the pressure of oversupply and the weakness in demand growth may still pose potential obstacles to the rebound.
Currently, market trading logic is more focused on short-term positive aspects, such as geopolitical risks and low inventories. As these favorable factors are gradually released, whether oil prices can break through the current strong resistance area remains to be seen. Until then, the market may maintain a range-bound trend, and investors should closely monitor the latest changes in geopolitical risks and inventory data.
The strong rebound in oil prices this week has been supported by favorable factors such as geopolitical risks and declining inventories. Although concerns over oversupply have not dissipated, short-term market sentiment has turned positive. However, weak demand and long-term supply pressures remain significant obstacles to the upward movement of oil prices, and future trends depend on the sustainability of favorable factors and investors' willingness to chase gains.
