Market Minute: A Big Week for Energy Commodities

The technical landscape for crude oil has remained bearish since mid-October, with prices trading within a relatively tight $6 range. However, this week could bring notable activity in the energy market. Geopolitical risks appear largely priced out, and the narrative of weak global consumption has lost momentum among traders. Here are some key potential catalysts for crude oil and gasoline futures this week. 

To start the week, China’s Caixin Manufacturing PMI exceeded market expectations, coming in at 51.5 compared to the anticipated 50.6. This marks an expansion in activity and a month-over-month improvement—exactly what energy bulls have been hoping for. China's petroleum product consumption has underperformed industry expectations throughout 2024. However, as we approach 2025, the anticipated stimulus measures are likely to take effect, potentially reviving the narrative of Chinese economic expansion and boosting oil demand. 

On the domestic front, attention will turn to the ISM Manufacturing PMI, which has painted a bearish picture since manufacturing activity entered contractionary territory in December 2022. In addition to weak activity, pricing pressures remain elevated, reflecting a stagflationary trend in the sector. While manufacturing accounts for approximately 30% of the U.S. economy, it is a critical indicator of broader economic health. 

A surprise positive print exceeding market expectations or signs of easing pricing pressures could bolster confidence in a potential bottom for the manufacturing sector, lending credibility to the “soft landing” narrative for the U.S. economy. 

Additionally, this week features a series of jobs reports: 

• Job Openings and Labor Turnover Survey (JOLTS)

• ADP Non-Farm Employment Change

• BLS Jobs Report (Friday)

The market anticipates a significant upward revision from last month’s sharp decline in job additions, which could influence sentiment across asset classes, including energy. 

All eyes are on OPEC’s meeting this Thursday. The organization has repeatedly delayed supply expansion plans in recent months, citing concerns over weak global consumption. However, smaller producers within OPEC are expected to push for a timeline to ramp up production to offset the economic impacts of the current supply restrictions on their GDP. Meanwhile, Russia has lifted a temporary ban on gasoline exports for major producers, which could marginally increase gasoline supply. However, given the inconsistent nature of Russia’s export policies, the market does not anticipate a significant near-term impact.