Oil prices hit their highest levels in over two months during Asian trading on Monday, supported by optimism around rising demand in China, the world’s top oil importer. However, a stronger dollar capped significant gains.
Crude prices marked two consecutive weeks of increases, driven by expectations of improved Chinese demand as Beijing prepares to roll out additional stimulus measures in the coming months.
Colder weather across the U.S. and Europe is also anticipated to boost demand for heating oil and distillates.
Despite these supportive factors, crude’s gains were tempered by the dollar’s strength, with the greenback climbing to over two-year highs ahead of key economic data releases this week.
By 20:11 ET (01:11 GMT), March Brent oil futures were up 0.2% at $76.63 per barrel, while West Texas Intermediate (WTI) crude futures rose 0.2% to $73.36 per barrel.
Cold Weather and Chinese Stimulus Raise Demand Expectations
The ongoing cold snap across the U.S. and Europe is projected to drive higher demand for heating oil, potentially tightening fuel supplies.
A polar vortex is bringing snow, ice, and freezing temperatures to large parts of the U.S., with similar conditions expected in Europe.
Meanwhile, in China, traders are optimistic about forthcoming stimulus measures aimed at addressing the nation’s ongoing economic slowdown. Upcoming inflation data this week is also expected to offer further insight into demand prospects for the world’s largest oil importer.
Dollar Strength Ahead of Key Economic Data
The dollar’s strong performance, bolstered by its rise to over two-year highs, remains a headwind for oil markets. Traders are closely watching key economic indicators this week, which could influence the trajectory of interest rates and broader economic policy.Oil prices faced downward pressure from a stronger dollar, which climbed to its highest level in over two years last week amid heightened expectations that the Federal Reserve will slow the pace of interest rate cuts in 2025.
Two Federal Reserve officials reinforced the central bank’s recent stance that the fight against inflation is far from over, fueling concerns that interest rates will remain elevated for a prolonged period.
Market attention has now shifted to several key economic reports scheduled for this week, with a particular focus on December’s nonfarm payrolls data, set to be released on Friday.
Additionally, protectionist policies anticipated under the incoming presidency of Donald Trump are expected to further bolster the dollar. A stronger dollar typically weighs on oil demand by making crude more expensive for international buyers.
