Oil Contracts on NYMEX: Range-Bound Trading Amid Geopolitical Events and Inventory Levels

Oil contracts on the New York Mercantile Exchange (NYMEX) have been trading in a range-bound manner recently, with prices largely unchanged despite early gains. This stability can be attributed to a combination of geopolitical events, inventory levels, and demand patterns. As of January 29, 2025, crude oil futures have retreated from the $80/bbl level seen in mid-January, with volumes and open interest falling to a roughly two-month low.



Geopolitical events, such as protests in Libya and potential changes in OPEC+ production, have influenced the price dynamics of oil contracts on the NYMEX. Protests in Libya have reduced oil exports from two of the country's ports, leading to a temporary supply disruption and driving up oil prices. Meanwhile, discussions among OPEC+ members to delay their scheduled production increase in January could tighten global oil supply and drive up prices. These geopolitical events create uncertainty and volatility in the oil market, leading to price fluctuations on the NYMEX.



Inventory levels and demand patterns also play a significant role in the current stability of oil prices. As of November 2024, global observed oil inventories increased by 12.2 million barrels (mb) to 7,655 mb, with higher crude oil stocks on land and on water more than offsetting draws in oil products. This increase in inventories, combined with a robust demand growth of 1.5 million barrels per day (mb/d) in the fourth quarter of 2024, contributed to the stability of oil prices. However, the situation may change in the coming months, as the IEA projects that global inventories will extend the gains in December, led mainly by a surge in oil products on water. This increase in inventories could put downward pressure on oil prices, as the market becomes more supplied. Additionally, the IEA expects world oil demand to grow by 940 kb/d in 2024 and 1.05 mb/d in 2025, which could further impact the stability of oil prices.

In conclusion, the range-bound trading of oil contracts on the NYMEX can be attributed to a combination of geopolitical events, inventory levels, and demand patterns. As these factors evolve, the market may become more or less volatile, impacting the range-bound trading of oil contracts. Investors and traders should closely monitor these developments to make informed decisions about buying and selling oil contracts.