January 10, 2025 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com
Crude oil prices are on track for a second straight day of gains, with Brent and WTI both up more than 2% today, hitting their highest levels since October last year.
Oil price gains come amid support from a set of positive factors, including favorable weather forecasts, continued announcements of measures to support the Chinese economy, in addition to the potential increase in supply restrictions from Iran and Russia.
As cold weather forecasts and warnings of winter storm in parts of the United States, in addition to Europe and Japan, will increase demand for crude for heating on the one hand, and extreme conditions may expose production facilities to disruption on the other hand, according to Reuters, citing the National Weather Service and JPMorgan.
In addition, withdrawals from crude inventories in the United States over the past seven weeks have contributed, along with weather forecasts, to supporting oil prices.
Also with this new year, markets are looking forward to seeing the results of China’s multiple support measures in rescuing the local economy and driving growth, which will enhance the positive outlook for demand for crude by its largest importers and support prices. We had previously witnessed this week another set of measures, including plans announced by the National Development and Reform Commission to support domestic consumption.
Consumer spending is one of the most prominent weaknesses in the Chinese economy, which has become heavily dependent on exports. However, exports are in turn under threat from the expected trade wars with the United States and the weak economic performance of China’s most prominent trading partners, the European Union.
Therefore, supporting the local economy has become more necessary than ever and is the focus of experts studying the effectiveness of support measures.
While the acceleration in the growth of the core Consumer Price Index, which excludes food and energy items (core inflation), in turn reflects the effectiveness of the measures in driving consumption.
As for the geopolitical and supply side, President Joe Biden’s administration is preparing in its final days before Donald Trump takes office to impose more sanctions on the Russian economy, according to Reuters. The sanctions may target Russian oil companies, tankers and insurance companies according to the agency as well.
With Trump in ten days, Iran is preparing for the second wave of “maximum pressure” measures targeting its oil exports, which could temporarily reduce supply in the markets, helping to fuel price gains.
On the other hand, continued better-than-expected data from the US economy and labor market could wake up the US dollar, which could in turn, when it rises against foreign currencies, pressure the prices of commodities denominated in it to decline.
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