A combination of factors is fueling a sustained rally in oil prices, although the potential for further significant gains appears constrained.
On the data front, the February delivery light crude oil futures contract on the New York Mercantile Exchange rose by $1.65 to settle at $61.15 per barrel, marking a 2.77% increase. Meanwhile, the March delivery Brent crude futures on the London exchange climbed $1.60 to close at $65.47 per barrel, up 2.51%. The SC crude oil main contract gained 2.90%, closing at 450 yuan per barrel.
Reports from January 13th indicate that Venezuela's crude oil production saw a significant drop last week compared to the end of November 2025, falling from 1.16 million barrels per day to approximately 880,000 barrels per day. State-owned oil company PDVSA has issued orders to restart wells in an effort to restore output. Furthermore, following a cyberattack, the company is preparing for an internal audit while simultaneously gearing up for new business ventures and investments.
Behind the scenes, Gulf Arab states including Saudi Arabia, Oman, and Qatar have been actively lobbying the Trump administration against launching a military strike on Iran. This diplomatic push came after the US issued warnings to these nations to prepare for potential American action against Iran. The Gulf countries conveyed to the White House that any attempt to overthrow the Iranian regime would disrupt oil markets, ultimately harming the US economy, with their primary concern being the impact on domestic stability.
The US government has sought court orders to seize dozens more tankers involved in Venezuelan oil trade. In recent weeks, US military and Coast Guard forces have already intercepted five vessels in international waters, either currently transporting or with a history of carrying Venezuelan crude. A blockade imposed by Trump in December, aimed at preventing sanctioned tankers from moving Venezuelan oil, had brought the country's exports to a near standstill, though shipments have resumed this week under US supervision. Sources indicate that the US government has filed multiple civil forfeiture lawsuits in district courts, creating a legal basis for seizing and confiscating oil cargoes and vessels engaged in this trade, with dozens of seizure warrant applications submitted.
The recent continuous rebound in oil prices is primarily driven by several factors: escalating tensions in Iran raising market concerns about Middle East geopolitical disruptions affecting oil markets; persistently low CPC crude exports with no clear timeline for the restoration of SPM No. 3; and substantial short-term buying pressure from the Bloomberg Commodity Index Fund's annual rebalancing. Looking ahead, the influence of commodity index funds is expected to dissipate, and while the threat of US action against Iran remains, the immediate Iranian situation has been contained without any actual impact on supply chains.
The short-term strategy suggests oil prices will fluctuate within a range, while a medium-term bearish allocation is advised.
Key risks include downside potential from a Russia-Ukraine peace agreement or macro black swan events. Upside risks involve supply tightening from sanctioned oil producers (Russia, Iran, Venezuela) or large-scale supply disruptions resulting from Middle East conflicts.
Investment advisory business license: CSRC Permit [2011] No. 1289.
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