December 24, 2024 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com
Oil prices are up today by around 0.9% and 0.5% for both WTI and Brent crude respectively, following two days of slight gains.
The oil price moves come as the holiday season begins, which sees a significant drop in market liquidity, especially for institutional investors.
Chicago Mercantile Exchange light sweet crude futures recorded trading volumes of around 447,000 contracts yesterday, less than half of this month's peak of more than 1.1 million.
Lower trading volumes around the holidays are typically associated with reduced selling pressure from institutional short sellers in the futures market across asset classes. This in turn could open the door to sudden spikes on positive shocks such as a sudden escalation of geopolitical tensions or a positive news flow from the Chinese economy.
As for the geopolitical aspect, specifically the Middle East, as previously and repeatedly mentioned, this region will play a less influential role in crude price movements as the escalation gradually subsides. This comes with the successive losses that Iran is suffering on various regional fronts. Add to that the weakness it suffers internally in terms of the stifling gas crisis that has caused widespread power outages, which may make it much less resilient in the face of any strikes that may target the oil, gas and energy infrastructure as a result of the renewed escalation of its attacks with Israel.
Farther away, in China, markets are awaiting the crystallization of the effects of the various support packages provided by the government to stimulate economic growth. Meanwhile, the authorities approved a historic issuance of three trillion yuan of treasury bonds next year, according to Reuters. This issuance is a continuation of the financial support packages and aims to raise consumption and finance investment in innovation in advanced sectors and to confront customs tariffs from the United States, according to Reuters sources as well.
Markets had been optimistic about the possibility of pushing the various stimulus measures to drive growth, which was reflected in the recovery of crude prices from their very low levels. However, the support measures continue to be criticized by experts for not targeting the weak points in the Chinese economy, such as the damage caused by the authorities' tightening of the economy, bureaucracy, and unfair social system, according to multiple reports from The Wall Street Journal and the Editorial Board opinion.
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