Oil Prices Soar for 5 Days: How Long Will It Last?

One of the main factors driving oil prices higher has been the persistent cold weather, which has boosted demand for heating oil, particularly in Europe and the U.S. This cold snap hasnt just benefited Brent and WTI; SC crude has also seen significant inflows, with the weakening of the Chinese yuan adding to the upward momentum. Despite having one fewer trading day due to the New Year holiday, oil prices still posted a weekly gain of over 5%, outperforming other major commodities, which have generally remained weak.

At the start of the year, market concerns over demand were relatively low, and there were no clear bearish factors to suppress oil prices. Meanwhile, oil inventories remain at low levels, leaving room for prices to rise. Coupled with potential positive catalysts like the cold weather, oil prices broke out of their range-bound pattern and began an upward trend. After a period of market indecision in late December, prices found the path of least resistance and continued to climb.

Will this rally continue?

A key short-term driver for rising oil prices is the cold weather in Europe and the U.S., which is expected to increase demand for heating, especially heating oil. This seasonal demand boost should provide support for oil prices in the coming weeks. Additionally, Chinas recent economic stimulus measures have fueled optimism about a global rebound in oil demand.

That said, market participants should remain cautious of the potential impact of Federal Reserve policies on the broader economy. With inflationary pressures still lingering and global economic recovery uncertain, these factors could pose risks to further oil price gains.

In conclusion, oil prices are likely to remain supported in the short term by both the cold weather and China‘s economic policies. It’s expected that oil prices will either stabilize at current levels or continue to rise.