Oil Prices Continue to Climb Amid Winter Fuel Demand

Oil prices experienced a rise during early Asian trading and are on track to record a third consecutive weekly gain, fueled by increased demand for heating fuel due to frigid weather in both the United States and parts of Europe.

Brent crude futures increased by 24 cents, or 0.3%, reaching $77.16 a barrel as of 0138 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures saw a gain of 26 cents, or 0.4%, bringing it to $74.18.

Over the past three weeks up to January 10, Brent crude has surged by 5.9%, while WTI has recorded a remarkable jump of 6.9%.

Analysts at JPMorgan noted that these price increases are driven by rising concerns about potential supply disruptions following tightening sanctions, coupled with low oil inventories, and the severe cold affecting many regions in both the U.S. and Europe. Additionally, there is an optimistic view regarding stimulus measures in China which further contributes to this shift in sentiment.

The U.S. weather bureau has forecasted that central and eastern parts of the country will experience below-average temperatures, while several areas in Europe have been grappling with extreme cold. This weather pattern is expected to spike fuel demand as the regions seek to maintain warmth, leading to greater consumption of oil and related products.

JPMorgan is projecting a noticeable year-over-year increase in global oil demand of approximately 1.6 million barrels per day in the first quarter of 2025, largely driven by demands for products like kerosene and liquefied petroleum gas (LPG).

In the market, the gap between the front-month Brent contract and the six-month contract has widened to its most significant level since August. This unusual scenario could indicate a tightening of supply amidst the increasing demand.

Interestingly, oil prices have continued to rally even as the U.S. dollar has strengthened for six consecutive weeks. A stronger dollar generally puts downward pressure on oil prices, as it makes crude oil more expensive for buyers using other currencies.

Looking ahead, supply challenges may intensify as U.S. President Joe Biden is anticipated to announce new sanctions aimed at crippling Russia's economy, targeting its oil sector specifically. This move is part of a broader strategy to support Ukraine's efforts against Moscow, particularly before the inauguration of President-elect Donald Trump on January 20.

Oil, Prices, Demand