WTI closed the week at 59.04 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude finished the week at 64.98 dollars a barrel on the London ICE Futures Exchange, both lower than they were on Jan. 1.
In response to Mideast tensions, crude oil prices moved up briefly and then returned to previous levels as the possibility of an immediate confrontation between the United States and Iran seemed unlikely, easing fears of supply disruption to the energy market.
WTI and Brent crude prices have decreased 3.31 percent and 1.55 percent so far this year, falling below the 60-dollar level and 65-dollar level, respectively.
The rise and fall of prices demonstrated that crude oil remained more resilient than other goods.
A quick recap of crude oil history may provide some clues into why the prices, despite the appearance of escalating tensions, are not still trending upward.
In September 2019, two facilities of Saudi Aramco, Saudi Arabia's national energy company, were attacked. It made prices rise. However, a quick survey of the spot oil price revealed that the uptick in prices was not a long-term trend.
Moreover, the surprising build in U.S. crude inventories and stronger U.S. Dollar Index also capped oil prices. According to the U.S. Energy Information Administration (EIA) on Wednesday, U.S. commercial crude oil inventories increased by 1.164 million barrels from the previous week, defying the market expected draw of 3.572 million barrels, implying weaker demand and bearish for crude prices.
Meanwhile, the U.S. Dollar Index navigated around mid-97.00 level, an area of fresh 2019 highs, and finished the week higher, extending the weekly recovery for the fourth session in a row. It once surpassed 97.50 during the week, touching new 2020 highs.
For the coming week, the market will watch closely the implications of the U.S.-China phase one trade agreement on the crude prices.
China will sign the phase one economic and trade agreement with the United States next week in Washington, China's Ministry of Commerce (MOC) said Thursday.
At the invitation of the U.S. side, Chinese Vice Premier Liu He, also a member of the Political Bureau of the Communist Party of China Central Committee and chief of the Chinese side of the China-U.S. comprehensive economic dialogue, is leading a delegation to visit Washington from Jan. 13 to 15, MOC spokesperson Gao Feng told a regular press conference.
Ryan Ray, managing director of R-Squared Global and co-host of the Texas Oil and Gas Podcast and Energy Week Podcast, believes that both the United States and China will benefit from the cooperation in energy sector.
"When the deal is signed, you might see a short-term bump in the price. However, as the broader economic impacts of the agreement begin to penetrate both economies, that is where the real impact will come," Ray said.