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Geopolitics & China Demand Brace Oil
2 Jan
Summary
- Crude oil and gasoline prices declined due to a bearish EIA inventory report.
- Strong Chinese crude demand and OPEC+ production pause plans support prices.
- Geopolitical risks from Venezuela, Nigeria, and Russia limit crude price losses.
Crude oil and gasoline prices reversed early gains, settling lower as a weekly EIA inventory report proved bearish. A significant factor contributing to the decline was the US dollar index reaching a one-week high, which typically pressures energy prices. Nevertheless, ongoing geopolitical tensions in key oil-producing regions like Venezuela, Nigeria, and Russia are acting as a floor for crude prices.
Support for oil prices is also stemming from robust demand in China, with imports expected to hit a record 12.2 million barrels per day this month. Furthermore, OPEC+ delegates have indicated that the group is likely to maintain its current production pause strategy when it convenes for its monthly meeting. These factors collectively cushion the market against steeper losses.
Additional price support arises from security operations in Nigeria and US actions against Venezuelan oil shipments. Meanwhile, Ukrainian drone and missile attacks targeting Russian refineries and tankers, alongside new sanctions, are impacting Russia's export capabilities and contributing to global supply concerns.
