Oil commentary - 6 January 2025
Morning all. Welcome to Monday. Welcome to January. Welcome to 2025. First of all, I want to wish every one of you, and your loved ones, a very Happy New Year. The Year of the Snake. But more about Donald Trump in a minute. (I’m only joking, Donald. Couldn’t resist).
Let’s have a look at where Brent, and its US cousin, WTi, has started trading on this first Monday of a brand-new year, shall we? Brent is trading this morning at $76.25, down 0.25, and WTI is trading at $73.71, also down 0.25. Nice. Very nice. The last time Brent was this high, you were probably more worried about whether the kids would come home and enter you into a pumpkin carving competition than about keeping up those ridiculous New Year’s resolutions.
Why has oil started the new year with such optimism, I hear you ask? Well, I’ve almost answered my own question there: optimism. Fundamentally, nothing has changed in the oil markets over the last couple of weeks. Apart from a belt buckle, or two. What has changed is the new year—and a new hope. A bit like Star Wars. A new hope, just without the Wookiees and lightsabres.
And why not start the year thinking, “Gee, you know what, oil demand will be great this year! It really will,” or “OPEC+ will continue to curb production, they will, they willllll!,” or “Interest rate cuts? Pfffff, they are so overrated.” In place of the crystallised disappointment that so many felt as 2024 came to a close, 2025 has ushered in a new sense of optimism. And that optimism is worth about three bucks a barrel, I reckon.
Seventy-five dollars per barrel for Brent. Not a bad number. A number that we at Kpler envision will likely be the average for 2025. However (and here’s the massive caveat), the future is fraught with headwinds. The same issues that markets couldn’t ignore at the end of last year are still very much here. Sure, fiscal stimulus from Chinese authorities, which could help boost oil demand for the world’s second-biggest importer of the black stuff, is helping add a boost too, but didn’t the Chinese demand story dominate—and then disappoint—for nigh on the whole of 2024? This, arguably, will be the biggest talking point, again, in oil markets. One of them, at least.
In my opinion, the oil market is riding a Trump Trade wave right now. Inauguration Day is just over two weeks away, and the whole market—not just oil—will be watching very closely to see if those aggressive policy threats come to fruition. Keep your eyes on Twitter, or whatever it’s called now.
Good day, week and year to all.
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