Recently, international crude oil prices have shown significant volatility, with night trading on Friday ultimately closing higher, ending a week of declines. However, on a weekly level, oil prices are still fluctuating between gains and losses, reflecting the current market instability. Caught between weak demand and low inventory support, oil price trends are influenced by a mix of bullish and bearish factors, causing investor sentiment to fluctuate accordingly.
The Battle Between Low Inventory and Weak Demand
Low inventory has recently become a crucial support for oil prices. U.S. commercial crude oil inventory has fallen to 421 million barrels, with Cushing crude inventory also at multi-year lows, indicating relatively tight market supply. Meanwhile, OPEC+ extended its voluntary production cuts to alleviate supply surplus pressures. However, the weak global crude demand increase remains a major constraint on oil prices.
According to market forecasts for 2024, the global crude oil demand increase is only 800,000 to 900,000 barrels per day, far below the average increase over the past 20 years. The two major consumer markets, the United States and China, are particularly sluggish, with almost no growth in U.S. demand, and China's refined oil consumption hitting a peak early and significantly declining. While projections for 2025 have been downgraded, the market remains cautious about future demand.
Macroeconomic Environment Intensifies Volatility
Last week, the U.S. Federal Reserve cut interest rates by 25 basis points as expected and predicted only two more cuts by 2025. This hawkish signal significantly impacted market risk preferences, putting pressure on commodity prices. However, the November PCE price index announced on Friday increased by only 2.4% year-on-year, lower than the expected 2.5%, easing inflation concerns, which led to a weaker dollar and a rebound in risk assets, including crude oil prices.
Market Outlook and Strategy Recommendations
Since the end of September, the crude oil market has shown a continuous low-level range fluctuation, lacking momentum for a short-term breakout. Although low inventory provides upward momentum, weak demand and uncertainties in the macroeconomic environment will continue to limit the extent of oil price rebounds.
For investors, the current market is suited to range-bound strategies to handle volatility, avoiding the pitfalls of chasing highs and selling lows passively. Future trends depend on whether demand can exceed expectations and on improvements in the macroeconomic environment, requiring investors to patiently await a pivotal breakthrough.
