In terms of financial attributes, the United States released December inflation data this week. The U.S. December CPI rose 2.7% year-on-year, unchanged from November last year. After excluding volatile food and energy costs, the core CPI increased 2.6% year-on-year, also flat compared to November. Both figures came in below market expectations. This led to a renewed rise in expectations for an interest rate cut in April, which had previously declined due to the impact of December's non-farm payroll data; however, the expectation for a January rate cut remains relatively low. From the market's projected timeline, no rate cut in January is almost a certainty. The expectation for an April cut is supported partly by the drop in CPI data and partly by market views that the Fed might not wait until after Chairman Powell's term ends in May to act. This has created some divergence in current expectations for rate cuts in April and June. Notably, if a rate cut occurs as expected in April, the probability of a June cut will warrant close attention, as it would be the first major decision by the Fed's new leadership.
On the political front, recent tensions between the United States and Venezuela have gradually cooled. The market has largely digested the impact of the earlier U.S. arrest warrant for Maduro. Even though the latter continues to resist, it may struggle to change the current situation where a significant volume of its crude products are exported to the U.S. Subsequently, the U.S. might further exert control over Venezuela's oil industry. Another major geopolitical event worth watching is the博弈 between the U.S. and Iran. Recent significant political turmoil within Iran, with protests lasting nearly three weeks, coupled with recent U.S. statements suggesting potential further military action, caused oil prices to climb for two consecutive trading sessions. However, subsequent comments from Trump indicating military action could be postponed, and Israel's communication to the U.S. advocating delay, led to a noticeable short-term pullback in oil prices. This clearly shows that Iran holds greater importance for the crude market compared to Venezuela, especially if its crude exports are affected, which would lead to more substantial and violent price fluctuations. Consequently, short-term oil price trends will face higher uncertainty due to changes in U.S.-Iran relations.
Regarding fundamentals, OPEC and the EIA recently released their respective monthly reports for December. The reports indicated that OPEC+ December production was 783,000 barrels per day below the planned level, with actual output at 37.44 million bpd against a planned 38.22 million bpd. OPEC member crude production in December was 23.17 million bpd, 61,000 bpd below the quota level. This suggests that OPEC+ is already laying the groundwork for the production cuts starting this January, with overall output showing a significant decline in December, which should somewhat alleviate the current market supply surplus. However, despite the drop in OPEC+ production, output from non-OPEC countries (such as the U.S., Brazil, Canada) remains high. Even if exports from Venezuela and Iran decline due to potential U.S. sanctions, the reduction is unlikely to fully offset the current market surplus, which will remain a drag on oil prices. On the consumption side, OPEC maintained its oil demand growth forecast for this year in its report but raised its forecast for next year for the first time, indicating relative optimism about medium-to-long-term crude market consumption levels, believing that global economic recovery will further boost fuel demand. However, although the EIA's monthly report slightly raised its oil price forecast, the agency stated this was due to technical adjustments rather than a shift to a more optimistic market view, noting that both perceived ample supply and accumulated refined product inventories are unfavorable for price recovery. It is also noteworthy that the recent IEA monthly report has not yet been released; based on its previous stance, the IEA is more likely to maintain its expectation of weak demand, aligning with the EIA's view. Therefore, looking at the overall commodity attributes, fundamental factors continue to generally weigh on oil prices.
Overall, recent oil price volatility has increased, primarily influenced by geopolitical uncertainties. Given the current market situation, the supply-side surplus within commodity attributes persists, compounded by still-weak demand-side recovery and consecutive inventory builds, maintaining a general drag on prices. Financially, market expectations for rate cuts are largely focused on April or June, suggesting that short-term macroeconomic pressure is unlikely to change significantly unless U.S. tariff policies shift further. Politically, beyond the previously focused U.S.-Venezuela incident and the Russia-Ukraine conflict, U.S.-Iran relations have recently exerted a strong influence on oil prices. If the U.S. takes further military action against Iran, oil prices could surge sharply in the short term. However, if U.S.-Iran relations move towards negotiations or de-escalation, the geopolitical risk premium in oil prices would likely be further eroded. Therefore, comprehensively, geopolitical factors will remain a core influence on oil price direction recently. Barring significant escalation, oil prices may continue weak due to supply-side pressures, but sudden news-driven fluctuations in the short term require vigilance. For reference only. Author Bio: Fan Lei, an analyst at Chang'an Futures, holds a master's degree and a futures investment consulting certificate: Z0021225. Possessing solid theoretical foundations and an international perspective; since entering the futures industry, he has consistently focused on research and analysis of macroeconomics, the crude oil and energy chemical sector, and options. Skilled in starting from fundamental analysis, combining policy direction theory to build analytical frameworks for market研判, and committed to creating value for clients with professional knowledge and sincere attitude.
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