On Tuesday, January 27th, the international crude oil futures market experienced a strong rise, with the WTI March crude oil futures contract rising $1.76, or 2.9%, and settling at $62.39 per barrel; The Brent crude oil futures contract for April (the most actively traded) rose $1.82, or 3.0%, to settle at $66.59 per barrel. The resonance of multiple positive factors such as the impact of the US winter storm on supply and the escalation of geopolitical tensions in the Middle East is driven by significant short-term supply disruptions, coupled with the rebound of geopolitical risk premiums, and the concentrated release of bullish sentiment in the market.

Winter storm hits US Bay severely, causing short-term disruptions in supply, production, and exports

A severe winter storm swept across the United States, causing a heavy blow to energy infrastructure and power grids, becoming the direct factor behind the rise in oil prices this time. According to analysts and traders' estimates, US oil producers lost up to 2 million barrels per day of crude oil production over the weekend, accounting for approximately 15% of the country's total production, indicating significant short-term supply contraction pressure.

In addition, from the perspective of exports, according to data from ship tracking service company Vortex, the export volume of crude oil and liquefied natural gas from ports along the Gulf Coast of the United States fell to zero on Sunday due to the impact of cold weather; The supply concerns caused by short-term export disruptions have been fully transmitted to the market. Industry insiders believe that if the cold weather in the United States continues, oil inventories may significantly decrease in the coming weeks, further supporting the upward trend of oil prices.

Tengiz oil field slow to resume production, global supply further tightens

The slower than expected recovery of production from Kazakhstan's largest Tengiz oil field has further exacerbated the tight global crude oil supply situation. According to industry insiders, the oil field is slowly recovering from fires and power outages, and is expected to recover less than half of its normal production by February 7th. Although one of the three mooring points located on the Black Sea coast of Russia has completed maintenance and its loading capacity has been restored to full capacity, this has limited relief effect on short-term supply and is difficult to offset the gap caused by the delayed resumption of production in Tengiz oil field.

Geopolitical tensions escalate, risk premium continues to rise

Recently, the ongoing geopolitical tensions in the Middle East have provided strong bottom support for oil prices. The news shows that the US aircraft carrier battle group has arrived in the Middle East, and the expectation of military action by the US against Iran is intensifying. The geopolitical tension in the Middle East continues to rise, further raising the risk premium of crude oil.

In addition, the tense relationship between Germany and the United States, as well as the ongoing lack of progress in the Russia Ukraine peace talks, have further intensified market concerns about the stability of global energy supply. The geopolitical risk premium continues to rise, becoming an important driving force for the increase in oil prices.

OPEC suspends production increase expectations, strong inventory data falls beyond expectations

Expectations of OPEC's production increase policy and unexpected decline in US crude oil inventories: On the one hand, three OPEC representatives revealed that at Sunday's meeting, the alliance may decide to continue suspending oil production in March. If the policy is implemented, it will effectively limit the increase in global crude oil supply and alleviate the pressure of supply-demand imbalance; On the other hand, data released by the American Petroleum Institute (API) shows that as of the week ending January 23, US crude oil inventories unexpectedly fell by 247000 barrels and gasoline inventories decreased by 415000 barrels, significantly better than market average expectations (expected crude oil inventories to increase by 1.8 million barrels and gasoline inventories to increase by 1 million barrels). The unexpected decline in inventories confirms short-term demand resilience and further strengthens market bullish sentiment.

According to crude oil analysts from SunSirs, short-term oil prices will still be dominated by supply disruptions and geopolitical risks, and bullish sentiment may continue. In the near future, with supply disruptions not completely subsiding, geopolitical risks continuing to rise, and strong expectations of OPEC suspending production increases, oil prices may still have room for upward movement. However, in the medium to long term, attention should be paid to the fading of favorable factors and potential pressure on the demand side. As favorable factors gradually fade away, the medium to long term pressure on the demand side will once again dominate the market, making it difficult for oil prices to form a trend upward trend and likely returning to a volatile pattern.

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