Why is the oil rally heating up in the new year?

　　This week (December 26-January 1), crude oil showed an overall volatile upward trend. WTI's average price was $70.73 per barrel, up $1.05 per barrel, or 1.51% from the previous week. During the week, the expected decrease in US crude oil inventories, the increased uncertainty in Europe's energy supply outlook, and the reduction in Mexico's crude oil production contributed to the rise in oil prices.

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　　Factors affecting the crude oil futures market

　　On the new year's first trading day, oil prices surged by almost 2%, reaching $76 during the day, setting a new high in almost two months.

　　As of the week of December 20, 2024, data from the U.S. Energy Information Administration showed that crude oil inventories were 4.53% lower than the same period last year; 5% lower than the same period in the past five years; gasoline inventories were 1.06% lower than the same period the previous year; 3% lower than the same period in the past five years; distillate oil inventories were 0.6% higher than the same period last year, and 10% lower than the same period in the past five years.

　　As the domestic financial market sentiment cooled in the Asian session, the crude oil sector once fell from its highs, but in the European session, oil prices rose again and attracted funds to follow, with European prices rising by more than 4%. The suspension of transportation through Ukraine from January 1st has increased market tensions. While worrying about the natural gas supply in Europe, the market is also worried that the cold wave will affect US oil production. In the past few years, there have been cases where cold waves have affected US oil production.

　　Boosted by multiple positive news, speculators increased their net long positions in light crude oil futures on the New York Mercantile Exchange by 7.4%. The third interest rate cut in the United States this year, India's crude oil imports in November increased year-on-year, and geopolitical concerns in Russia and the Middle East have still driven funds to continue to flow into the crude oil futures market.

　　Market Outlook for Next Week

　　The main factors boosting oil prices during the week: First, the cold weather caused a sharp rise in natural gas and heating oil prices; second, the US EIA crude oil inventory dropped significantly beyond market expectations; third, the Middle East conflict triggered panic buying; fourth, China may introduce more fiscal stimulus measures.

　　The main factors that suppressed oil prices: first, India's imports of Russian crude oil in December fell month-on-month; second, trading was light during the year-end holidays; third, the US dollar exchange rate strengthened; and fourth, expectations of oversupply of crude oil remained.

　　Saxo Bank believes that oil price fluctuations in 2024 will be mainly determined by two opposing forces: geopolitical tensions related to the conflicts in the Middle East and Ukraine, and concerns about slowing demand.

　　Russia and Ukraine have confirmed that they have suspended gas supplies after a key gas transit agreement expired, which means that Central European countries that rely on Russian gas will be forced to purchase more expensive gas from other places, causing energy shortages in Europe this winter as gas reserves are being consumed at the fastest rate in years.

　　Jinlianchuang expects that next week (1.2-1.8), Chinas recent optimistic economic data and stimulus policies will provide favorable support to the market, the economic operation in 2024 will end smoothly, and the foundation will be laid for a good start to the economic operation in 2025.

　　On the whole, the crude oil market may fluctuate and rise slightly next week.