Price Performance Indicators

COFR Focus:

• (31/12 – 07/01) Crude oil closes the week with a substantial gain of 5.42%
• The political focus of one of producing countries acted as the main catalyst

The COFR rupiah- denominated crude oil contract ended the first week of 2022 with a substantial appreciation of 5.42% to the level of Rp 1,129,400,- per barrel. Although sentiment is mixed around the oil market, especially regarding the balance of supply and demand levels, price action tends to respond more aggressively to positively correlated issues. Among these are the development of conflicts in one of the major producing countries, namely Kazakhstan, and the potential for further reductions in oil supply in Libya, the US and Canada.

Soaring fuel prices that have sparked protests in Kazakhstan since early January forced the government on Wednesday to impose a two-week state of emergency in the Mangystau Region and in the Almaty Region, as well as the republic's largest city Almaty and the capital Nur-Sultan. However, the wider demonstrations have contributed to calls for additional demands including lower prices for everyday commodities, boosting the economy and increasing wages and lowering gas fuel prices, said Abzal Saparbekuly, the Kazakh ambassador on Thursday. The increasingly heated geopolitical situation in OPEC allied member countries which produce around 1.6 million bpd or contribute to around 2% of global crude oil production has the potential to have an impact on world oil supply which is a positive catalyst for oil price movements.

Meanwhile, Libyan oil production is currently reported to be at 729,000 bpd, down from a high of more than 1.3 million bpd last year, state oil firm National Oil Corp (NOC) said on Thursday. Supporting oil price moves, a lower-than-usual winter has led to pipeline freezes blocking oil flows in Canada and the Northern US.

Despite all that, however, the continued soaring global spread of Omicron that threatens fuel demand, as well as the broad geopolitical issues – will continue to overshadow the price movement.

Market View

The Development of COVID in China Need to be Watched

Meanwhile, the rate of deployment of the Omicron variant continues to pose a threat to fuel demand growth. The government of the Chinese city of Tianjian began testing all its citizens on Sunday after at least two local cases of the Omicron variant were detected. China's health authorities on Sunday reported 165 confirmed coronavirus cases for January 8, up from 159 the day before, and 92 of the new infections were locally transmitted. The development has sparked fears of falling fuel demand driven by tighter activity restrictions in the world's second-largest oil consuming nation.

Further Geopolitical Focus

The escalating tension between Iran and the US and geopolitical tensions in the Middle East will also color the trading session next week. Iran will face severe consequences if it attacks any of the Iranian Foreign Ministry's list of US citizens sanctioned on Saturday, the US White House national security adviser said. The escalating tension between Iran and the US has the potential to hamper the ongoing nuclear negotiations between Iran and the six major world powers, which at the same time indicates that the return of Iranian barrels to the world oil market will also be delayed.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research