Oil prices increased in early Asian trading and are on track for a third consecutive week of gains, driven by rising fuel demand for heating due to cold weather in parts of the United States and Europe.
Brent crude futures rose by 40 cents, or 0.5%, to $77.32 a barrel at 0602 GMT. U.S. West Texas Intermediate crude futures also gained 38 cents, or 0.5%, to $74.30.
Over the three weeks ending January 10, Brent has gained 6%, while WTI has risen 7%.
JPMorgan analysts linked the price increase to concerns over supply disruptions due to tightening sanctions, low oil stockpiles, freezing temperatures in the U.S. and Europe, and optimism about China’s stimulus efforts.
The U.S. weather bureau forecasts below-average temperatures in central and eastern regions, while many parts of Europe have been experiencing extreme cold and are expected to continue facing a colder-than-usual start to the year. JPMorgan expects this to drive up demand.
“We foresee a significant year-over-year increase in global oil demand of 1.6 million barrels per day in the first quarter of 2025, mainly driven by heating oil, kerosene, and LPG demand,” JPMorgan said in a note on Friday.
At the same time, the premium of the front-month Brent contract over the six-month contract reached its highest level since August, suggesting potential supply tightness amid rising demand.
Despite a strengthening U.S. dollar, which typically pressures oil prices by making crude more expensive outside the U.S., oil prices have continued to climb.Supplies could face additional disruptions as U.S. President Joe Biden is expected to announce new sanctions targeting Russia’s economy this week, aimed at supporting Ukraine’s war efforts against Moscow before President-elect Donald Trump takes office on January 20. Russia’s oil industry has been a primary focus of these sanctions.
“Uncertainty regarding Trump’s approach to Iran is providing additional support. Asian buyers have already been seeking alternative oil grades from the Middle East, as broader sanctions against Russia and Iran make it harder to access this oil,” ING analysts noted in a report on Friday.