During the traditional Chinese Lunar New Year holiday, international crude oil experienced a strong rebound. According to the monitoring of SunSirs, from February 8th to 16th, WTI crude oil increased by 7.02% and Brent crude oil increased by 6.21%. The main reason is focused on the issue of geopolitical tension in the Middle East.

It is worth noting that on February 8th, on Chinese New Year's Eve, the Israeli military intensified its armed strikes on the southern Gaza city of Rafah. After Israeli Prime Minister Netanyahu rejected Hamas's proposed ceasefire, on Thursday, February 8th, Israeli troops bombed the southern border city of Rafah. The geopolitical situation is heating up, further pushing up the risk premium of crude oil. As of the close, WTI crude oil surged by over 3% in a single day. In the following trading days, as the situation did not further escalate, the rise in oil prices was somewhat suppressed, but the risks remained high and oil prices remained hovering.

At present, geopolitical risk factors have become the main driving force behind the rise of crude oil. Crude oil recorded a weekly increase of 6% on February 9th, and the Middle East conflict has led to a sustained rise in oil prices. In addition, there are reports that the United States has rejected Russian President Putin's proposal for a ceasefire in Ukraine. This news has also heated up the oil market. This further exacerbates the concerns about crude oil supply caused by the tense situation in the Middle East.

Inventory data has brought some positive news to the oil market. Last week, the US Energy Information Agency (EIA) showed that gasoline and medium distillate inventories in the United States decreased more than expected, which also boosted the oil market. Specifically, gasoline inventories decreased by 3.7 million barrels to 247.3 million barrels that week, with market expectations for a decrease of approximately 1.2 million barrels. Distillate oil inventories, including diesel and heating oil, decreased by 1.9 million barrels to 125.66 million barrels, following market expectations of a decrease of 1.6 million barrels.

Practitioners analyze that the decrease in fuel inventory is mainly due to the maintenance of American refineries, and the decrease in refinery operating rates is conducive to inventory consumption. At the same time, it also sends a positive signal to the market.

In addition, the 2024 US Department of Energy's replenishment strategy for crude oil reserves is being implemented in an orderly manner. The recent plan is to purchase approximately 3 million barrels of oil and deliver them to the Strategic Oil Reserve in July, while continuing efforts to replenish the reserves. Last month, the agency announced that it would purchase 3.1 million barrels of oil for the Strategic Petroleum Reserve (SPR), to be delivered in May, and stated plans to purchase up to 3 million barrels of oil again, to be delivered in June. The US replenishment plan has also played a positive role in regulating market crude oil inventories.

On February 15th, last Thursday, the International Energy Agency (IEA) lowered its global oil production forecast for 2024. The agency stated that global oil demand growth is losing momentum and predicts that global oil demand growth will slow to 1.22 million barrels per day in 2024, about half of last year's growth, partly due to a significant slowdown in Chinese consumption. The institution had previously predicted a demand increase of 1.24 million barrels per day in 2024.

The logic behind the rise in crude oil mainly comes from the supply side, while the factors limiting the increase in oil prices come from the demand side. The current slowdown in global economic growth is a highly probable event. This has brought pressure to the oil market.

SunSirs crude oil analysts believe that the upward trend in the oil market during the Spring Festival period is mainly driven by geopolitical tensions. The factors that affect oil prices are short-term supply and long-term demand. The future supply and demand will intensify the game. In the short term, it may be influenced by news factors, which may drive up the risk premium of crude oil; However, in the medium to long term, weak demand growth remains a powerful constraint on crude oil, and it will also flatten the risk premium of crude oil over a longer period of time.

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