Oil prices rose in early Asian trading, heading for a third straight weekly gain as cold weather in the U.S. and parts of Europe boosted demand for heating fuel.
Brent crude futures rose 40 cents, or 0.5%, to $77.32 a barrel by 0602 GMT. WTI oil futures also rose 0.5%, to $74.30.
Brent rose 6% in the three weeks ended Jan. 10, while WTI jumped 7%.
Low oil inventories, freezing air conditions in many parts of the U.S. and Europe, improving expectations for China’s stimulus measures, and growing concerns about supply disruptions due to tightening sanctions are all driving the upside for oil.
Many parts of the U.S. and Europe have been hit by extreme cold and will continue to experience colder-than-normal weather. This will boost demand.
Global oil demand is expected to rise by 1.6 million barrels per year in the first quarter of 2025. The increase is mainly driven by the demand for heating oil, kerosene, and LPG.
Meanwhile, this week, the premium for the front-month Brent contract over the six-month contract reached its highest level since August, suggesting tight supply at a time of rising demand.
Oil prices rose despite a six-week strengthening of the US dollar. A stronger dollar typically makes it more expensive to buy crude outside the US, putting downward pressure on demand and prices.
Supply could be further affected as Biden is expected to announce new sanctions on the Russian economy this week to support Ukraine’s war effort against Moscow ahead of President-elect Trump’s inauguration on January 20.
Uncertainty over how hawkish Trump will be on Iran is a major factor. Asian buyers are already looking for alternative quality products from the Middle East. Wider sanctions on Russia and Iran are bound to make the flow of oil even more difficult.
