Cold Weather Buoys Oil Prices

Yesterday, Brent crude futures were up by 76 cents or 1 per cent at $76.92 a barrel and the US West Texas Intermediate (WTI) crude futures grew by 60 cents or 0.82 per cent to $73.92 per barrel.

In some US states like Texas and Virginia, there were reports of winter storm warnings on Thursday and this has led to diesel futures trading at their highest levels since early October 2024.

Analysts estimated that for the US, Europe and Japan, for every degree Fahrenheit, the temperature drops below its 10-year average, it translates to an increase of 113,000 barrels per day in demand for heating oil and propane.

Extreme winter conditions can lead to disruptions in oil supplies as freezing temperatures may cause temporary freeze-offs and production cuts.

Meanwhile, in his last days as US President, Mr Joe Biden will announce new sanctions targeting Russia’s economy.

The administration is trying to bolster Ukraine’s war effort against Russia before President-elect Donald Trump takes office on January 20. A key target of sanctions so far has been Russia’s oil industry.

The second coming of Mr Trump to the White House has sparked crude oil traders are buying more oil futures due to possible sanctions on Iran and tariffs.

The President-elect has made no secret of his attitude toward Iran, and he demonstrated that during his first term when he withdrew the largest oil producer from the Joint Comprehensive Plan of Action, commonly referred to as the Iran nuclear deal, and slapped back sanctions that the JCPOA had put an end to previously.

The Biden administration that took over in 2020 did not pay as much attention to Iran and sanction enforcement.

As a result, Iran boosted both its production of crude oil and exports, with the latter jumping by over 10 per cent in 2024 to a total of 587 million barrels.

With sanctions in place, the majority of Iran’s barrels went to China, a move that suggests that whatever way Mr Trump chooses to tighten sanction enforcement, it would have an impact on US-Chinese relations.

Pressure came as the US Dollar strengthened further on Thursday.

A stronger makes oil expensive for holders of other currencies, making prices weaker.