Oil prices remained steady at their highest levels since mid-October, supported by a combination of colder weather in key regions, stronger demand signals, and expectations of tighter sanctions on Iranian and Russian oil exports.
Brent crude futures rose by 22 cents, or 0.3%, to $76.73 a barrel as of 11:33 GMT, marking their highest level since October 14. Similarly, U.S. West Texas Intermediate (WTI) crude climbed by 23 cents, or 0.3%, to $74.19, its strongest since October 11.
Demand Fueled by Colder Weather and Fiscal Stimulus
Oil prices have gained for five consecutive sessions, buoyed by colder-than-normal temperatures in northwest Europe and the United States, which have spurred energy consumption. A rally in natural gas prices and higher refining profit margins have further bolstered Brent crude, according to SEB analyst Bjarne Schieldrop.
In addition, expectations of fiscal stimulus to revitalize China’s slowing economy have raised hopes for increased demand from the world’s largest crude importer.
Market Eyes Economic Data and Fed Signals
Investors are closely monitoring upcoming economic indicators for further insights into global energy consumption and interest rate trends. The U.S. Federal Reserve’s minutes from its last meeting, set to be released on Wednesday, and the December payrolls report on Friday are expected to provide key signals about the economic outlook and potential shifts in energy demand.
Saudi Aramco Raises Prices on Firm Demand
Saudi Aramco, the world’s largest oil exporter, announced its first price hike in three months for February crude deliveries to Asian buyers, a move often seen as a signal of strong demand expectations. The decision reflects tightening market fundamentals as colder weather and improving economic conditions drive consumption.
Tighter Sanctions Loom Over Iranian and Russian Oil
On the supply side, stricter sanctions on Iranian and Russian oil exports are likely to tighten the market further. The Biden administration plans to intensify sanctions on Russia in response to its war on Ukraine, targeting tankers carrying Russian crude.
Meanwhile, Goldman Sachs predicts a decline in Iranian oil production and exports, anticipating that the incoming administration of U.S. President Donald Trump will implement tougher policies. The bank expects Iranian output to drop by 300,000 barrels per day (bpd) to 3.25 million bpd by the second quarter of 2025.
A Tightening Market
With a combination of rising seasonal demand, supply constraints, and geopolitical pressures, the oil market appears to be heading into a period of tightening fundamentals. Investors and analysts will be watching closely for further developments that could shape the route of oil prices in the coming months.
