Recap: The oil market fell on the first day of trading in the new year after posting the largest annual loss since 2020 as traders continue to weigh oversupply concerns against geopolitical risk. Russia and Ukraine traded allegations of attacks on civilians on New Year’s Day despite the talks between Ukraine and the U.S. aimed at bringing an end to the war. Meanwhile, the Trump administration’s efforts to increase pressure on Venezuela’s President Nicolas Maduro continued after the U.S. imposed sanctions on four companies and associated oil tankers that it said were operating in Venezuela’s oil sector. Also, the crisis between Saudi Arabia and the UAE over Yemen has increased after flights were halted at Aden’s airport on Thursday. The oil market retraced some of Wednesday’s losses and traded to a high of $57.93 in overnight trading. However, the market’s gains remained limited as it sold off once again and traded to a low of $56.60, breaching an upward trending support line at $56.98. The market later retraced some of its losses, trading over the $57.00 level. The February WTI contract settled down 10 cents at $57.32 and the February Brent contract settled down 10 cents at $60.75. The product markets ended the session lower, with the heating oil market settling down 55 points at $2.1151 and the RB market settling down 72 points at $1.6982.
Technical Analysis: The crude market is seen retracing some of its losses and continuing to trade in its recent trading range. It will be driven by the latest headlines regarding the geopolitical risks, including the war in Ukraine, the continuing U.S. pressure on Venezuela’s President and the tensions between Saudi Arabia and the UAE. The market will also look to OPEC+ meeting on Sunday, when the producers are expected to leave their output policy unchanged. The oil market is seen finding support at $56.60, $55.61, $55.08 and $54.89. Meanwhile, resistance is seen at $57.93, $58.55, $58.88, $58.93, followed by $60.01 and $60.12.
Fundamental News: At the end of last week, Venezuela’s President Nicolas Maduro extended an olive branch to U.S. President Donald Trump, proposing serious talks on combating drug trafficking and offering U.S. companies ready access to Venezuelan oil. He said Venezuela was a “brother country” to the United States and a friendly government. The comments represent a shift in his tone towards the United States since the latter launched a military buildup in the southern Caribbean. President Trump has accused the “illegitimate” Maduro of running a narco-state and threatened to remove him from power.
Yemen’s southern separatist movement said it aimed to hold a referendum on independence from the north in two years, following its seizure of parts of the country last month in a move that triggered a major feud between the UAE and Saudi Arabia. Southern Transitional Council leader Aidarous al-Zubaidi called on the international community to sponsor talks between concerned parties in the south and north on a path and mechanisms that “guarantee rights of the people of the south”. The announcement comes as the Saudi-backed internationally recognized government moved to recapture the crucial region of Hadramout from the STC, which is backed by the United Arab Emirates. Earlier, the Saudi-backed governor of Yemen’s Hadramout province said he would launch a peaceful operation to take back military positions from the UAE-backed Southern Transitional Council, but that the actions were not a declaration of war.
Three OPEC+ sources said OPEC+ will likely maintain steady oil output at its meeting on Sunday, despite political tensions running high between Saudi Arabia and the UAE over Yemen.
IIR Energy said U.S. oil refiners are expected to shut in about 192,000 bpd of capacity in the week ending January 2nd, decreasing available refining capacity by 47,000 bpd. Offline capacity is expected to increase to 625,000 in the week ending January 9th.
Early Market Call – as of 8:40 AM EDT
WTI – Feb $57.86, up 53 cents
RBOB – Feb $1.7042, up 45 points
HO – Feb $2.1360, up 1.9 cents
