This Thursday, domestic crude oil prices shifted from strong to weak, with domestic crude futures dropping to around 607 RMB/barrel, while international oil prices continued to rise. By the close, WTI crude futures settlement price rose 0.82%, to $73.92 per barrel; Brent crude futures rose 1%, closing at $76.92 per barrel.
Main Drivers of Recent Oil Price Increase
Since December last year, domestic and international crude oil prices have been fluctuating upwards, driven by multiple factors. According to Zheng Mengqi, an energy and chemical researcher at Hai Zheng Futures, the key reasons for the recent rise in oil prices include:
- Cold Weather and Supply Tightness
The termination of the Russia-Ukraine gas transmission agreement and U.S. winter storms causing wellhead freezing and pipeline transport disruptions have driven up natural gas prices, indirectly supporting crude oil prices. - Policy Impact
On January 6, the Biden administration announced a permanent ban on oil and gas development in parts of the Atlantic and Pacific oceans, covering 625 million acres, which is a positive for crude oil prices. - OPEC+ Production Adjustments
OPEC's crude production in December 2024 decreased by 50,000 barrels per day month-on-month, Saudi Arabia raised oil prices heading to Asia, and Russia's December production was below the OPEC+ target, all supporting oil prices. - Geopolitical Risks
Recent strong statements by Trump on various geopolitical economic issues have further increased market uncertainty, providing additional support to oil prices.
Reasons for Short-term Price Weakness
Zheng Mengqi points out that although the previous positive factors had been concentratedly released, driving up oil prices, the price increase momentum has weakened with the fall in natural gas prices and weakened demand. Additionally, EIA data shows a slight decrease in U.S. crude oil inventories, but a significant increase in gasoline and distillate inventories, reflecting a lack of market demand.
Future Oil Price Outlook
Looking to 2025, the trend of oil prices remains uncertain. Huang Liunan, chief analyst at Guotai Junan Futures, believes that although domestic crude oil prices have performed better than international ones against the backdrop of RMB depreciation and declining warehouse receipts, the oil price upside may be limited due to the price difference returning to historical highs and the warehouse accumulation effect brought by second-quarter production increases.
- Strategy Before the Spring Festival
During the Spring Festival holiday, the risk of fluctuation in international oil prices is significant, suggesting that investors should adopt a price fluctuation focus and consider options strategies rather than unilateral trends. - Annual Strategy
The uncertainty in OPEC+ production increase pacing makes it difficult for the market to establish a smooth unilateral trend. If production increases start in April, there is a high probability of oversupply in the first half of the year. Huang Liunan suggests prioritizing short positions in unilateral strategies. - Regional Market Divergence
Differences in refining capacity between Asia and Europe/USA may lead to further widening of the price spread between domestic and international markets, with the increase in refining capacity in the Asia-Pacific region possibly making SC crude prices relatively strong, constituting a potential benefit.
Key Points of Market Attention
As Trump's policies gradually clear after taking office on January 20, market understanding of global trade frictions and the Iran issue may become clearer. Additionally, the growth potential of domestic demand in China and the clarification of market expectations may further influence oil price fluctuations. Zheng Mengqi advises investors to continuously monitor policy changes and market supply and demand data to carefully formulate investment strategies.
