Oil prices have been steadily high for now, maintaining its level since mid-October of last year. This has been influenced by growing demand due to the cold season and geopolitical factors.
Specifically, Brent crude futures gained 0.3% at $76.73 a barrel, while US West Texas Intermediate (WTI) crude oil advanced 0.3% at $74.19. These are the highest prices since October and marked the fifth rise in a row.
Reuters reported that the colder-than-seasonal weather pattern in parts of the Northern Hemisphere especially in Europe, and the US greatly contributed to an increase in rise, as energy demand for fueling heating goes up. Other factors supporting the oil market are the increased prices of natural gas and greater profit margins for refineries. In the next week, investors are watching closely to see which economic indicators might bring more insight into global energy consumption trends.
For the week ahead, investors eagerly await US Federal Reserve interest rate decisions as well as the December payrolls report, both of which are likely to be market sentiment catalysts in future oil demand.
Sanction on Russian Oil
Geopolitical developments on the supply side are adding further tension to the market.
Currently, the outgoing Biden administration is expected to slap a more stricter sanctions on Russian oil exports, specifically targeting tankers carrying Russian crude. This move is part of ongoing efforts to punish Russia for its actions in Ukraine, further tightening the global supply of oil. At the same time, the world's biggest oil exporter, Saudi Aramco, said February oil prices to Asia increased with stronger expectations. This was Saudi Aramco's first price hike in three months.
The tightening sanctions on Iran and Russia are expected to affect oil supply globally as well. New US sanctions and changes in policy would result in 300,000 barrels per day decrease in Iranian oil production in the second quarter of 2025, as predicted by Goldman Sachs, BOE Report revealed. Thus, with possible disruptions in the global oil supply, factors are likely to maintain oil prices in the short term.
With supply tightening and demand projections strengthening, this is providing an environment conducive to oil prices staying at or near their current highs.
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