Weekly Summary 16 January 2025: Inflation, Earnings, Oil Prices, Tech Trends
Thursday 16 January 2025
Crude Oil Makes Strong Start to 2025
The price of oil gained ground on Wednesday, 8 January, with both Brent crude oil and WTI crude oil futures rising. Higher oil prices have been attributed to tighter supply from the OPEC+ group of oil-producing countries, including Russia as well as improvement in US economic data. Gains in the New Year have lifted oil prices to the highest levels since October.
Is this the start of a new uptrend across energy markets or could other factors pull oil lower again? (Source: Reuters)
Brent Crude Oil Performance
Despite recent gains, oil prices have been mixed over the past year. Brent crude oil (EB) dropped -1.62%, while WTI crude oil (CL) is up +5.60% in the 12 months through 7 January 2024. This belays a wide 52-week range with Brent trading between $68.68 and $92.18 per barrel and WTI between $65.27 and $87.67. (Source: Financial Times)
The daily candlestick chart shows the Brent Oil CFD breaking out of a 2-month old triangle pattern, generally perceived by some technical analysts as a short-term bullish development.
Why Is Crude Oil Rising?
As a commodity, crude oil prices should reflect supply and demand, so news that there has been lower production in some of the major producing nations, as well as improved economic data from the United States that could indicate higher demand for oil in a stronger economy - both contributed to rising prices.
1. Improved Economic Data
The US Bureau of Labor Statistics (BLS) released new data on Tuesday, 7 January, revealing 8.1 million job openings at the end of November, up from 7.84 million in October and marking the highest level since May 2023. The strong data comes ahead of Non-farm payroll data on Friday. Companies seeking to hire new employees are generally taken by economists to mean that these businesses feel confident about future prospects.
2. Lower Production from OPEC and Russia
On Monday, the Organisation of Petroleum Exporting Countries (OPEC) announced a reduction in crude oil production, driven largely by significant cutbacks from the United Arab Emirates (UAE). Production dropped by 120,000 barrels per day, bringing the total to 27.05 million barrels per day. The overall decline was partially offset by modest increases in output from Libya and Nigeria. This reduction aligns with the UAE's stepped-up efforts to enforce supply cuts aimed at stabilising the global oil market amid forecasts for weaker demand this year.
Trump Tariff Uncertainty
Looking ahead to the state of the global economy this year, market uncertainty about the possible economic impacts of tariffs once Donald Trump takes over as US President can possibly be seen in the Chinese yuan touching a 16-month low as well as the euro approaching parity with the US dollar.
Trump has vowed to impose tariffs of up to 10% on global imports and 60% on Chinese goods, along with a 25% import surcharge on products from Canada and Mexico. Trade experts warn that such measures would disrupt trade flows, increase costs, and provoke retaliatory actions, possibly hurting economic growth and slowing oil demand- or perhaps curtailing supply - notably from Iran and possibly Canada, leading to a spike in oil prices.
Conclusion: Will Oil Prices Continue to Advance?
Crude oil prices have started 2025 on a strong note, with Brent and WTI futures rising to their highest levels since October thanks to tighter OPEC+ supply cuts and improved US economic data signalling stronger demand. However, uncertainty surrounding potential tariff policies under Trump’s administration could disrupt trade flows, impact economic growth, and influence future oil price movements.
