On Wednesday (January 8th) during the European trading session, crude oil futures rose sharply, continuing their upward trend. Oil prices show a strong upward trend, and unless there is an unexpected negative in the upcoming inventory report, oil prices will further rise.

Investors are paying attention to the EIA inventory report scheduled to be released at 14:30 Greenwich Mean Time (22:30 Beijing Time), which is expected to show a decrease of 1.8 million barrels in crude oil inventories. If the decline is greater than expected, it may trigger a new round of upward trend, while if the decline is small or unexpected, it may trigger profit taking and reverse the recent bullish trend.

OPEC production decline supports claims of tight supply

According to a Reuters survey, OPEC's daily production in December fell by 50000 barrels to 26.46 million barrels. Prior to this, oil production had been increasing for two consecutive months. The main reason for the decline is on-site maintenance in the United Arab Emirates, which reduced production by 90000 barrels per day, partially offset by increased production in Nigeria and Libya.

Iran's production also decreased by 70000 barrels per day, contributing to the overall reduction in production. Despite the previous increase in production, further production increase may face pressure from possible tightening of US sanctions. At the same time, OPEC's major oil producing countries Saudi Arabia and Iraq have complied with the production reduction agreement and maintained stable production.

OPEC+continues to implement existing production reduction measures to offset the increase in production by non OPEC oil producing countries, delaying any planned increase until April. The tightening of supply in core OPEC member countries has boosted bullish sentiment as traders take into account factors such as reduced supply and stable demand.

Economic data strengthens demand prospects

In the United States, economic indicators show strong economic activity, supporting stronger oil demand. The latest Job Vacancies and Labor Mobility Survey (JOLTS) shows an unexpected increase in job vacancies, strengthening expectations for robust economic growth. Analysts believe that this trend indicates that industrial activity is expanding, thereby boosting the outlook for oil consumption.

In addition, data from the American Petroleum Institute (API) shows a decline in US crude oil inventories, further fueling bullish sentiment. In addition, with OPEC tightening its supply, the short-term supply-demand balance seems to lean towards an increase in oil prices.

China's fuel oil imports face new tax policy pressure

After the fuel oil import tax rate is raised from 1% to 3%, China's fuel oil imports are expected to decrease in early 2025. This policy shift, coupled with the reduction of tax refunds introduced in October last year, is expected to put pressure on Chinese refining companies and further restrict imports.

Trade sources indicate that small refineries relying on fuel oil as raw material may reduce imports, which could put pressure on regional fuel oil prices. The spot premium of Russian M100 fuel oil has weakened, reflecting a decrease in demand expectations. Russian M100 fuel oil is the main raw material for Chinese refining enterprises.

technical analysis

WTI Crude Oil 4-hour Chart

The crude oil price has shown further positive trend and is approaching our previously expected target price of $75.65, which strengthens our expectation of continuing the upward trend for the remainder of today. It is worth noting that there is a high possibility that oil prices will break through this level and further rise, reaching $76.45. It should be noted that the continuation of this upward trend depends on whether oil prices can stabilize above $73.70.

The expected trading range for today is between the support level of $73.45 and the resistance level of $76.45.