China stimulus boosts Hong Kong and Shanghai
Cieszynski noted that the recent surge in oil prices was partly due to China’s stimulus measures, which provided a boost to both the Hong Kong and Shanghai markets. The attacks in the Middle East have led to retaliatory strikes on Houthi targets by the U.S. military and its allies. This situation has also resulted in the rerouting of cargo ships and oil tankers, causing delays and increased shipping costs. However, oil flows from the Middle East have not been disrupted as of yet.
U.S. supply reductions and a return to normal winter conditions
Another factor contributing to the recent oil price rally is the supply reductions from the U.S. due to cold weather conditions in North Dakota, Texas, and other regions. This shift follows what has been described as the warmest December in 150 years, which reduced the demand for heating oil and added pressure to oil prices. Jay Hatfield, the CEO at Infrastructure Capital Advisors, believes that this rally indicates a return to a “somewhat-normal winter.”
Furthermore, Hatfield’s company estimates that the price range for WTI oil in 2024 will be between $75 and $95. This estimate is based on a global supply-and-demand analysis and is supported by improving growth in China and India, along with continued OPEC production constraints.
Macquarie strategists remain cautiously bullish
In contrast to the positive sentiment, strategists at Macquarie maintain a cautious stance on crude oil, citing structural bearishness. However, they are tactically neutral to slightly bullish until tensions in the Middle East either stabilize or ease. They anticipate that oil prices will remain within their current range for the first quarter of 2024, barring any escalation or unexpected supply losses.