Global oil prices are experiencing their most substantial weekly surge since October, propelled by persistent geopolitical tensions, diminished US crude stockpiles, and the anticipation of additional economic stimulus in China, a major crude importer.
Brent, the global benchmark, hovers near $82 per barrel following a 3% surge in the previous session, breaking out from its recent narrow range. Meanwhile, West Texas Intermediate remains close to $77 per barrel, trading at a two-month high.
The surge in crude prices is underpinned by heightened Middle East tensions, including US strikes on Iran-backed Houthi rebels in Yemen to halt attacks on commercial shipping. Simultaneously, refinery strikes in Russia pose threats to crude flows amidst the prolonged conflict in Ukraine.
January has witnessed a more than 7% increase in oil prices, supported by an unexpectedly substantial reduction in US inventories and Chinese policymakers’ efforts to stabilize their economy. However, traders maintain caution due to expectations of ample supply from non-OPEC producers and sluggish demand growth in major importers like India.
Market strategist Yeap Jun Rong from IG Asia Pte emphasizes that previous attempts to deter Red Sea attacks have not averted disruptions. This has led market participants to factor in prolonged tensions. Lower US inventories and robust US GDP data further contribute to positive sentiment.
Notably, there is a noticeable widening in crude timespreads, indicating tighter market conditions. Brent’s three-month spread has expanded to $1.25 per barrel in backwardation, a bullish pattern, contrasting with a mere 16 cents per barrel differential at the month’s outset.
