Oil Prices Rise as Cold Weather Boosts Winter Fuel Demand
Oil prices rose more than 1% on Thursday as cold weather gripped parts of the US and Europe, boosting winter fuel demand. Futures were up 98 cents, or 1.29%, at $77.14 a barrel by 1:10 p.m. EST, while US West Texas Intermediate crude futures gained 84 cents, or 1.15%, to $74.16.
The rise is attributed to winter fuel demand, with parts of east Texas up to the north of Kentucky under a winter storm warning. Refinery crude runs rose by 45,000 barrels per day in the week to January 3, while utilization rates climbed by 0.6 percentage points to 93.3%. Refiners along the US Gulf Coast raised their crude oil net inputs to the highest levels since December 2018.
JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day year on year to 101.4 million barrels per day, primarily driven by the increased use of heating fuels in the Northern Hemisphere. The market structure in Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time demand is increasing.
The premium of the front-month Brent contract over the six-month contract reached its widest since August, indicating that supply is declining or demand is increasing. The dollar strengthened further on Thursday, and oil prices are expected to oscillate within a range of $67.55 to $77.95 into February as the market awaits more clarity on Trump’s planned policies and fiscal stimulus from China.