18.01.2024 – Crude oil is not really getting off the ground. Despite the various conflicts everywhere, traders see a market in stalemate. However, as soon as decisive news arrives, things could move very quickly in one direction or the other.
The sharp rise in Brent since the Hamas attack on Israel on 7 October has long since been worked off. The nervousness has subsided and the price has fallen back. Oil has made itself comfortable in a relatively narrow channel – here is the daily chart of Brent.
Source: Bernstein Bank GmbH
Israel could decide to take out Hezbollah in Lebanon after Hamas. In any case, the fighting in Lebanon is increasing. The skirmishes between Iran and Pakistan could also move the price if they escalate; the same applies to the attacks by the USA and the UK on the Iranian-backed Houthi rebels in Yemen. Otherwise, the news has been mixed recently.
OPEC and Occidental bullish
OPEC sees increased demand on the horizon. In its Monthly Oil Market Report for January, OPEC stated that solid demand from China will increase by 1.8 million barrels per day in 2025. The organisation expects economic output to increase by 2.8 per cent next year, compared to 2.6 per cent in 2024.
Meanwhile, the latest economic data from China provided no reason to buy. In the fourth quarter of 2023, the economy grew by 5.2 per cent, compared to 4.9 per cent in the third quarter. However, the figure was around 0.1 per cent below most analysts’ estimates.
Of course, Occidental Oil also sounded the alarm: the world is facing a collapse in supply from 2025, said Group CEO Vicki Hollub at the World Economic Forum in Davos. The ratio of resources to demand has fallen to 25 per cent. Hollub said: “2025 and beyond is when the world is going to be short of oil.” In view of ageing oil fields, the oil industry must invest more in the development of new deposits.
On the long side, news from North Dakota did not really provide a boost: production here has fallen by up to 700,000 barrels, but presumably only for a few days.
IEA and Standard Chartered bearish
Meanwhile, the International Energy Agency sees no reason for a price shock: the oil market is well supplied this year.
Meanwhile, the major bank Standard Chartered sided with the bears. The market is showing signs of ignoring risks and the situation is similar to that at the beginning of 2023, the experts said, pointing to the possibility that the oversupply is greater than in previous years. In addition, the USA and Europe are the sources of weak demand and not China.
All in all, the oil price currently remains trapped in a stalemate: “Brent crude prices remain broadly stuck in a range as they has been over the past two weeks, as market participants struggle to weigh mixed demand-supply dynamics with prevailing geopolitical tensions,” said Yeap Jun Rong, analyst at IG Market, in an interview with Reuters. With this in mind, we will keep an eye on the situation for you!
_____________________________________________________________________________________________________________________________________
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7