Since the beginning of the year, the international crude oil market has witnessed a remarkable surge, reflecting positively on oil-themed investment fundsToday, Brent crude on the Intercontinental Exchange (ICE) surpassed $81 per barrel, marking an increase of approximately 9% since the start of the yearThis upward trend has also propelled the stock values of related companies such as Baker Hughes and Chevron, which have all seen gains of over 10%, leading to a robust increase in crude oil fundsNotably, the S&P oil and gas ETF has risen about 25% in the last twelve months.

The same can be observed in the Chinese market, where today, the CSI S&P Oil and Gas ETF from E Fund surged over 3%, with an impressive annual gain nearing 27%, placing it at the forefront among all ETFs in the Chinese marketLooking back, the price of this ETF has rebounded over 30% since hitting its lowest point in December last year.

Additionally, the prices of refined oil products in China have also seen an increase, effective from midnight on January 16, 2025, when gasoline and diesel prices will rise by 340 yuan and 325 yuan per ton, respectively.

International oil prices have been on a consistent upward trajectory.

When examining the trend over a longer timeframe, it is clear that since late December last year, the international crude oil market has shifted from a downward spiral to a trend of recovery.

According to data from Wind, as of January 16, ICE Brent crude and NYMEX West Texas Intermediate (WTI) crude have each gained over 10% in the past month

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Recently, Brent crude increased by 0.4% to $81.62 per barrel, while WTI rose by 0.5% to $78.22 per barrel.

The recovery in international crude oil prices has directly influenced the rise in Chinese oil pricesIn response to changes in international oil market conditions, gasoline and diesel prices will see an increase of 340 yuan and 325 yuan per ton starting from midnight on January 16, 2025. This adjustment translates to a price increase of 0.26 yuan per liter for 92# gasoline and 0.28 yuan per liter for 0# diesel.

During the most recent pricing cycle for refined oil (from January 2 to January 15), international oil prices favored a significant upward shift, reaching their highest levels in nearly six monthsThis surge is largely attributed to the U.Simplementing a new round of sanctions on Russian crude oil production and exports, leading to tightened supply expectations

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It is predicted that these sanctions may directly result in a reduction of 900,000 to 1 million barrels per dayFurthermore, increased demand for heating oil during winter and unexpectedly lower crude oil inventories have further exacerbated the anticipated supply tightnessAs of the week of January 10, U.Scommercial crude oil inventories have fallen for eight consecutive weeks, reaching their lowest levels since April 2022.

Energy ETFs are experiencing a significant surge of around 30%.

Amid the strong rebound in oil prices, related energy stocks have also performed admirably, with Baker Hughes and Chevron both climbing over 10% since the beginning of the year, which has substantially propelled oil funds.

Wind data shows that E Fund's S&P Oil and Gas ETF rose nearly 2% today, with a year-to-date increase of about 25%, ranking it as the top ETF in the market

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If we look back over a longer period, this ETF's market price has rebounded more than 30% since its low point in December last year, significantly outperforming the benchmark performance of approximately a 17% increase in the S&P Oil and Gas Exploration and Production Select Industry IndexCurrently, the premium rate stands at 15%.

Following closely, the S&P Oil and Gas ETF from Invesco has also surged nearly 30% since its low point in December, with a premium rate around 15%. Other oil-related funds such as Huabao Oil LOF, GF Oil LOF, and E Fund Oil LOF have seen increases exceeding 10%.

In terms of net asset value performance, oil-themed funds have dominated the QDII performance rankings this yearWind data reveals that as of January 16, the net values of funds like Bosera S&P Oil and Gas, E Fund S&P Oil and Gas, and Invesco S&P Oil and Gas have surged by 10.65%, 9.97%, and 9.96% respectively, marking a sharp contrast to last year's performance rankings, which were dominated by technology-focused funds.

Short-term optimism contrasted with medium-term caution.

The current short-term strength in oil prices has exceeded the expectations of many investors

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So, what exactly is the market trading in recent times? What direction will international oil prices head toward in the future?

According to Yang Yang, the fund manager of the Huabao Oil Fund, from a medium to long-term perspective, we are currently in a new cycle of energy transition where oil and gas companies are exercising caution concerning their future capital expendituresThis long-term supply inadequacy is likely to keep oil prices elevated.

He believes that traditional energy still plays a critical role in global economic life, and within this broader context of global energy transition, the high prices of traditional energy and insufficient investment from upstream companies will likely persist until new energy sources gradually replace old energy systems as the mainstream solution.

Looking into the next few years, the focus of Invesco's analysis framework is "short-term inventory monitoring, medium-term supply and demand evaluations" to predict the trends of the oil market as we approach 2025:

In the short term, U.S

commercial crude oil inventories serve as a crucial indicator for the U.Soil marketCurrently, the decline in U.Soil inventories has exceeded expectations, supporting a short-term recovery in oil pricesThis phenomenon is partly driven by recent increases in downstream demand, with marginal rebounds in refinery processing volumes facilitating inventory reductionsHowever, seasonally speaking, the first quarter is generally considered a slow demand period, resulting in low replenishment incentivesThus, while the downward trend in inventories currently supports rising oil prices, the sustainability of this trend remains uncertain, necessitating continued monitoring of upcoming refinery maintenance and refined oil demand.

From a medium-term perspective, the core factors influencing oil price trends will remain rooted in supply and demand dynamicsProjections for 2025 suggest looser supply-demand expectations, potentially leading to a slight decline in the oil price baseline

On the supply side, changes in OPEC+ production policies are of significant interestAlthough the ongoing delays in production increases provide temporary support for prices, these delays reflect a more pessimistic outlook on demand, indicating that supply growth is contingent upon a synchronous recovery in demandOn the demand side, since the latter half of 2024, weaker demand expectations have contributed to oscillating declines in oil prices, and no obvious signals have emerged to drive demand upwardsLooking ahead, if the slope of economic recovery in China rises, crude oil demand may witness a boost.

However, the analysis also points out that aside from the influences of supply, demand, and inventory, geopolitical risks remain a considerable factor that continues to disrupt oil pricesOverall, current conditions suggest that the upside elasticity of oil prices is greater than the downside elasticity, indicating a potential increase in market interest in bullish positions; yet, in the medium-term context of anticipated looser supply-demand balance, oil prices may enter a new operational range characterized by slight gradual declines.