The surge in U.S. stocks overshadowed the crude oil glut warning and crude oil continued to rise sharply
The U.S. stock market closed at a new high, causing the dollar exchange rate to fall, making commodities more attractive to overseas buyers, and leading to a sharp rise in crude oil prices. Brent crude prices were just below $83 a barrel after rising 1.5% on Thursday, while WTI crude prices were near $78, near their highest since mid-November.
Crude oil is trading near the upper end of a narrow range so far this year, with both benchmarks on pace for their fourth gain in the past five weeks. However, the International Energy Agency (IEA) has warned of a potential crude oil glut throughout the year due to weak global demand growth.
Despite this warning, the risk-bias sentiment in the broader market and signs that OPEC+ members were complying with production cuts have overshadowed the bleak demand outlook. OPEC+ states that it has been cutting production to support oil prices. As of January, Russia is close to achieving its production reduction target for the first time since making a voluntary production reduction commitment last year.
In addition to OPEC+ efforts, fighting between Hezbollah and Israel in the Middle East has intensified, with cross-border fighting escalating further this week and raising alarms of a wider war. Alongside geopolitical tensions, traders are also eyeing the impact of disruptions in the Red Sea and refinery shutdowns on supply, with benchmark diesel and gasoline futures rising by double digits since the start of the year and crude oil gaining about 7%.
All of these factors have contributed to the continued sharp rise in crude oil prices, despite the warning of a potential glut. As the market remains volatile, it will be important to closely monitor both the demand outlook and ongoing geopolitical tensions to understand the future direction of crude oil prices.