Oil prices climbed Friday, marking a potential third consecutive week of increases driven by rising fuel demand amid icy weather in parts of the U.S. and Europe. Brent crude futures increased by $1.15, or 1.50%, to $78.07 per barrel, while U.S. West Texas Intermediate (WTI) crude futures rose by $1.11, up 1.50% to $75.03 a barrel.
Since mid-December, Brent and WTI have seen gains exceeding 6% and 7%, respectively. JPMorgan analysts attribute these increases to concerns about supply disruptions due to heightened sanctions targeting Russia and Iran, compounded by low oil inventories and harsh winter conditions across significant regions in the U.S. and Europe. Additionally, there is a growing optimism about China’s economic stimulus measures enhancing market sentiment.
The U.S. National Weather Service predicts below-average temperatures for the central and eastern parts of the country. Similarly, many European areas are experiencing intense cold spells. This trend is expected to continue, with JPMorgan analysts forecasting a spike in demand for heating oil, kerosene, and LPG, leading to a year-over-year global oil demand growth of 1.6 million barrels a day in Q1 2025.
Significantly, the gap between the front-month Brent contract and the six-month contract has reached its widest since August, suggesting potential supply shortages amid escalating demand. Interestingly, oil prices have maintained their rise despite a six-week strengthening of the U.S. dollar, which typically dampens oil prices by making crude purchases more costly overseas.
Further supply constraints loom as U.S. President Joe Biden is poised to introduce new economic sanctions on Russia, aiming to support Ukraine’s conflict against Moscow before President-elect Donald Trump assumes office on January 20. So far, Russia’s oil sector has been a primary target of these sanctions.
