Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
By Irina Slav – Jan 10, 2025, 1:10 AM CST
Crude oil prices were set for their third week of gains today, as demand for heating fuel kept prices elevated.
The gains are modest for both Brent crude and West Texas Intermediate but indicative of a stronger market than some expected.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for heating oil, kerosene, and LPG,” JP Morgan analysts said this week, as quoted by Reuters.
This demand is being driven by colder weather than the last two winters, in both Europe and the United States. There is also a concern that last-minute sanctions against Russia from the Biden administration could further affect supply in a negative way.
The bank’s analysts have estimated that for every degree Fahrenheit that temperatures drop below the 10-year average for this time of the year, demand for crude oil increases by 113,000 barrels daily as heating needs increase. An additional bullish risk comes from the danger of production interference from the weather due to freezing, the analysts said.
Citi commodity analysts are also bullish on crude oil thanks to the weather. The bank raised its price forecast for Brent crude in the first quarter of the year to $71 per barrel from $65 per barrel previously, also citing the likelihood of additional U.S. sanctions against Iran.
Forecasts for oil market volatility are also changing amid a pullout of algorithmic traders from that market after two years of losses. Bloomberg reported the development, citing data from Bridgerton Research Group, which showed algo traders were quitting oil after a second consecutive year of losses, with the weight of the commodity in their portfolios halving from 4% in mid-2024 to just 2% at the start of the new year.
By Irina Slav for Oilprice.com
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Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.